Why This Counts: 10 Million U.S. Establishments for the First Time

In the third quarter of 2018, the number of establishments in the U.S. economy reached 10 million. This milestone is based on data from the Quarterly Census of Employment and Wages (QCEW), which uses administrative records to identify the number of establishments in our economy.

What is the QCEW?

The QCEW compiles quarterly reports of the Unemployment Insurance systems in each state, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. Every business with an employee, other than the owner, must register with the state where it has a business location. We call these locations establishments.

 Behind the number

Behind the 10 million establishments are some interesting facts about our labor market.

First, the U.S. labor market is dynamic

Roughly 200,000 establishments are new each quarter. That adds up to almost 800,000 new establishments each year. If we consider that we first hit the 9 million mark in third quarter 2007, you may wonder why we didn’t reach 10 million sooner.

Some establishments continue for long periods, while others close. In 2018, more than half of all private sector establishments were 10 years or older. And while the number of establishments grows in most years, during a recession fewer establishments open and more close. Openings and closings that mostly offset one another result in a pretty stable rate of change in the total number of establishments over time.

Line chart showing the number of establishments each quarter from 2001 to 2018

Editor’s note: Data for this chart are available in the table below.

Second, most establishments are small

If we define small establishments as having fewer than 500 employees, 99.8 percent of all establishments in the U.S. economy are small. These employ 82.6 percent of workers and pay 73.5 percent of all wages, including bonuses.

Less than one-tenth of 1 percent of establishments have 1,000 employees or more, yet these establishment have an outsized impact. In first quarter 2018 they accounted for 11.0 percent of employment and 17.8 percent of total wages, far higher than their representation in our economy.

Chart showing the share of establishments, employment, and total wages by establishment size in the first quarter of 2018

Editor’s note: Data for this chart are available in the table below.

Slicing the data a different way, we find that 62.5 percent of all establishments in first quarter 2018 had fewer than 5 employees. In fact, the five industries with the most establishments are all dominated by small establishments.

Services for the elderly and disabled is the industry with both the highest number of establishments and the highest number of small establishments. In first quarter 2018, it had 742,364 private establishments, and 97.1 percent of them had fewer than 5 employees. The industry office of physicians, except mental health ranks fifth in the U.S. economy in terms of the number of establishments, and 52.5 percent of them had fewer than 5 employees.

An interesting story about physicians’ offices

The real value of the QCEW data is in its fine level of detail. Drilling down, we find that in first quarter 2018 Los Angeles County had 10,360 establishments in offices of physicians, except mental health, ranking first in the U.S. economy.

However, the highest concentration of physicians’ offices is not in Los Angeles, but in Johnson County, Georgia. We use location quotients to measure the concentration of establishments in a geographic area. A location quotient greater than 1 means the industry has a greater concentration of establishments within the county than in the nation. With a location quotient of 5.0, Johnson County has five times the concentration of physicians’ offices than the nation.

Offices of physicians, except mental health, number of establishments and establishment location quotients in selected counties, first quarter 2018
County Number of Establishments Establishment location quotient
Johnson County, Georgia 14 5.0
Greenup County, Kentucky 40 3.2
Boyd County, Kentucky 103 3.1
Angelina County, Texas 107 2.8
Jefferson County, Texas 359 3.0
Los Angeles County, California 10,360 1.0

 

So, who uses the data?

The detail available in QCEW data is important to a range of users. In the private sector, commercial real estate brokers may use the data when deciding the best location for a new business. Small business owners may compare average weekly wages. Large corporations may use local data to develop geographic profiles and market studies.

In the public sector, local and regional economic development agencies use the data for planning and program development. Understanding the type and size of establishments can help them recruit and retain businesses and support workforce development investment. Disaster relief agencies use information on the size of establishments or the concentration in an area to determine risk and track recovery efforts. State governments and academic institutions use the data to study the health of regional economies.

Want to know more?

For this blog, we use private ownership data from first quarter 2018 to explore QCEW establishment size data. You can explore establishment size data using the QCEW Data Viewer.

For even more information, visit our QCEW page.

Number of establishments, 2001–18
Quarter Number of establishments
Q1 2001 7,925,541
Q2 2001 7,958,077
Q3 2001 8,008,006
Q4 2001 8,046,492
Q1 2002 8,042,613
Q2 2002 8,060,770
Q3 2002 8,124,227
Q4 2002 8,179,879
Q1 2003 8,188,261
Q2 2003 8,206,992
Q3 2003 8,239,152
Q4 2003 8,280,956
Q1 2004 8,298,175
Q2 2004 8,305,907
Q3 2004 8,389,106
Q4 2004 8,465,990
Q1 2005 8,478,533
Q2 2005 8,525,655
Q3 2005 8,613,899
Q4 2005 8,666,489
Q1 2006 8,690,719
Q2 2006 8,726,001
Q3 2006 8,816,751
Q4 2006 8,902,635
Q1 2007 8,862,947
Q2 2007 8,936,111
Q3 2007 9,014,197
Q4 2007 9,074,333
Q1 2008 9,028,884
Q2 2008 9,059,689
Q3 2008 9,108,151
Q4 2008 9,131,473
Q1 2009 8,967,310
Q2 2009 8,984,662
Q3 2009 9,020,598
Q4 2009 9,040,216
Q1 2010 8,925,889
Q2 2010 8,962,280
Q3 2010 9,014,193
Q4 2010 9,070,072
Q1 2011 8,989,800
Q2 2011 9,042,922
Q3 2011 9,104,661
Q4 2011 9,153,801
Q1 2012 9,006,016
Q2 2012 9,179,368
Q3 2012 9,128,346
Q4 2012 9,173,740
Q1 2013 9,107,736
Q2 2013 9,178,547
Q3 2013 9,241,547
Q4 2013 9,295,722
Q1 2014 9,288,442
Q2 2014 9,313,909
Q3 2014 9,380,061
Q4 2014 9,463,005
Q1 2015 9,414,823
Q2 2015 9,470,124
Q3 2015 9,561,224
Q4 2015 9,644,927
Q1 2016 9,601,391
Q2 2016 9,677,672
Q3 2016 9,758,568
Q4 2016 9,828,841
Q1 2017 9,718,391
Q2 2017 9,807,791
Q3 2017 9,871,253
Q4 2017 9,942,980
Q1 2018 9,910,520
Q2 2018 9,988,054
Q3 2018 10,065,152
Q4 2018 10,169,140
Percent of establishments, employment, and total wages by establishment size, first quarter 2018
Number of employees in establishment Percent of total establishments Percent of total employment Percent of total wages
1,000 or more 0.1% 11.0% 17.8%
500 to 999 0.1 6.4 8.7
Fewer than 500 99.8 82.6 73.5