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How Small Business Drives U.S. Economy

Provides jobs for over half of nation's private workforce

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What really drives the U.S. economy? No, it is not war. Small business -- firms with fewer than 500 employees -- drives the U.S. economy by providing jobs for over half of the nation's private workforce. The latest figures from the SBA show that small businesses with fewer than 20 employees increased employment by 853,074 during 2001-2002.

These and other statistics outlining small business' contribution to the economy are contained in the Small Business Profiles for the States and Territories, 2005 Edition from the Office of Advocacy of the U.S. Small Business Administration (SBA).

"Small business drives the American economy," said Dr. Chad Moutray, Chief Economist for the Office of Advocacy in a press release. "Main Street provides the jobs and spurs our economic growth. American entrepreneurs are creative and productive, and these numbers prove it."

Small businesses are job creators. Office of Advocacy funded data and research shows that small businesses represent 99.7 percent of all firms, they create more than half of the private non-farm gross domestic product, and they create 60 to 80 percent of the net new jobs.

In 2004, there were an estimated 23,974,500 businesses in the U.S. Of the 5,683,700 firms with employees, 5,666,600 were small firms.

The latest data also show that in 2002:

  • women owned 6,492,795 firms;

  • Blacks owned 1,197,988 firms;

  • Hispanics owned 1,574,159 firms;

  • Asians owned 1,105,329 firms; and

  • American Indians and Alaskan Natives owned 206,125 firms.

    In 2004, there was strong growth of 7.3 percent in proprietor's income -- a partial measure of small business income. Business bankruptcies decreased by 2.1 percent and self-employment increased by 2.2 percent. This and other data for each state and territory are available in individual economic profiles on the Office of Advocacy website at http://www.sba.gov/advo/research/profiles.

    The Office of Advocacy, the "small business watchdog" of the government, examines the role and status of small business in the economy and independently represents the views of small business to federal agencies, Congress, and the President. It is the source for small business statistics presented in user-friendly formats and it funds research into small business issues.

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