The U.S. economy is comprised of millions of establishments with paid employees. The population of these businesses is constantly churning –– some businesses grow, others decline, and yet others close. New businesses are constantly replenishing this pool. The Business Dynamics Statistics (BDS) tracks these changes over time, providing annual measures of establishment openings and closings, firm startups and shutdowns, and job creation and destruction. These measures are available for the entire economy, and by industrial sector, 3-digit and 4-digit NAICS, state, MSA, and county. They are also available by firm and establishment size and age. The BDS is created from the Longitudinal Business Database (LBD), a confidential database available to qualified researchers through secure Federal Statistical Research Data Centers. The use of the LBD as its source data permits tracking establishments and firms over time.
BDS data tables show key economic data:
The BDS series provides annual statistics for 1978 to 2020 by:
There is a longstanding interest in the contribution of small businesses to job and productivity growth in the U.S. Some recent research suggests that it is business age rather than size that is the critical factor (see, e.g., Davis and Haltiwanger  and Haltiwanger, Jarmin, and Miranda ). The BDS permits exploring the respective contributions of both firm age and size.
One key advantage of the BDS is that business dynamics at both the firm and establishment level can be tracked, measured and analyzed. Another advantage is that the BDS is based on data going back through 1976. This allows business dynamics to be tracked, measured and analyzed for young firms in their first critical years as well as for more mature firms including those that are in the process of reinventing themselves in an ever changing economic environment. Examples of this can be found in Moscarini and Postel–Vinay (2009) and Moscarini and Postel–Vinay (2011) (286 KB).
The BDS data can help economists, policy–makers, and the business community develop a more complete understanding of the dynamics of employment over the business cycle and the contribution of businesses of different age and size.
The Business Dynamics Statistics (BDS) is a product of the U.S. Census Bureau. The BDS were developed by the Center for Economic Studies (CES). The BDS data are compiled from the Longitudinal Business Database (LBD). The LBD is a longitudinal database of business establishments and firms with coverage starting in 1976. As additional years of the LBD become available, the BDS will be updated.
The LBD is constructed by linking annual snapshot files from the Census Bureau's Business Register (BR)  (and incorporating edits to BR data made by the County Business Patterns program) to provide a longitudinal history for each establishment. The linkage process makes use of numeric establishment identifiers as well as probabilistic name and address matching. The linkage process allows the tracking of net employment changes at the establishment level, which in turn allows the estimation of jobs gained at opening and expanding establishments and jobs lost at closing and contracting establishments.
The LBD was originally conceived and constructed to be a research dataset only available to qualified researchers through the network of secure Census Bureau Research Data Centers. It has been used in numerous studies that have been published in leading scholarly journals. It has also seen increased use as source of special tabulations. The growing demand for tabulations from the LBD is why the Census Bureau has developed the publicly–available BDS.
The coverage and scope of the BDS are based on the Census Bureau's County Business Patterns (CBP) program. The CBP program has been producing annual statistics on different measures of economic activity since 1964. The CBP serves a wide constituency of users including researchers, policy makers and the business community alike. It is used by the research community to study the economic activity of small areas and to analyze economic change over time; by program areas as a benchmark for statistical series, surveys, and databases between economic censuses. Businesses use the data for analyzing market potential, measuring the effectiveness of sales and advertising programs, setting sales quotas, and developing budgets. Government agencies use the data for administration and planning.
Table 1 presents a detailed listing of the CBP in–scope rules. County Business Patterns covers most of the country's economic activity. The only major exclusions are self–employed individuals, employees of private households, railroad employees, agricultural production employees, and most government employees. This represents the practical totality of the private non–agricultural sector of the economy. Table 2 presents definitions of key data items in the BDS.
Table 1. BDS Industrial Scope and Coverage
|11-Agriculture, Forestry, Fishing and Hunting (NAICS 113-115)
21-Mining, Quarrying, and Oil and Gas Extraction
48-49Transportation and Warehousing
52-Finance and Insurance
53-Real Estate and Rental and Leasing
54-Professional, Scientific, and Technical Services
55-Management of Companies and Enterprises
56-Administrative and Support and Waste Management and Remediation Services
62-Health Care and Social Assistance
71-Arts, Entertainment, and Recreation
72-Accommodation and Food Services
81-Other Services (except Public Administration)
|Excluded Employee Types||Self–employed
Domestic service workers
Agricultural production workers
Most government employees
Employees on ocean–borne vessels
Employees in foreign countries
Table 2. Definitions of Key Data Items in the BDS
|Establishments||CBP excludes establishments in the following industries: crop and animal production (NAICS 111,112), rail transportation (NAICS 482), Postal Service (NAICS 491), pension, health, welfare, and vacation funds (NAICS 525110, 525120, 525190), trusts, estates, and agency accounts (NAICS 525920), office of notaries (NAICS 541120), private households (NAICS 814), and public administration (NAICS 92). CBP excludes government establishments except for wholesale liquor establishments (NAICS 4248), retail liquor stores (NAICS 44531), tobacco stores (NAICS 453991), book publishers (511130), monetary authorities – central bank (NAICS 521110), federally-chartered savings institutions (NAICS 522120), federally-chartered credit unions (NAICS 522130), hospitals (NAICS 622), gambling industries (NAICS 7132), and casino hotels (NAICS 721120).|
|Employment||Full– and part–time March 12 employees. Includes employees on paid sick leave, holidays, and vacations. Does not include proprietors and partners of unincorporated businesses.|
|Payroll||Total payroll includes all forms of compensation, such as salaries, wages, reported tips, commissions, bonuses, vacation allowances, sick–leave pay, employee contributions to qualified pension plans, and the value of taxable fringe benefits.|
Establishments are used in the tabulation of the BDS statistics. An establishment is a fixed physical location where economic activity occurs. A firm may have one establishment (a single–unit establishment) or many establishments (a multi–unit firm). Firms are defined at the enterprise level such that all establishments under the operational control of the enterprise are considered part of the firm. Firm level data are compiled based on an aggregation of establishments under common ownership by a corporate parent using Census Bureau company identification numbers. The firm–level aggregation, which is consistent with the role of corporations as the economic decision makers, is used for the measurement of the LBD data elements by size class and age class.
The BDS describes job flow and entry/exit patterns for establishments in the U.S. Currently the BDS provides two sets of statistics. The first describes establishment job flows and entry/exit patterns as a function of the characteristics of the establishment (age and size). The second describes establishment job flows and entry/exit patterns as a funtion of the characteristics of the firm (firm age and firm size) with which they are associated. We use two different measures of firm (establishment) size: actual firm (establishment) size and initial firm (establishment) size. Actual firm (establishment) size is defined as the average of year t–1 and year t employment. Initial firm (establishment) size is defined for any given consecutive two–year period as the size at year t–1 except in cases when year t–1 employment is equal to zero in which case initial size is year t employment. Initial firm (establishment) size categories are identical to those for firm (establishment) size.
Both establishment and firm age are computed from the data (see Becker et al.  and Davis et al. ). Birth year is defined as the year an establishment first reports positive employment in the LBD. Establishment age is computed by taking the difference between the current year of operation and the birth year. Given that the LBD series starts in 1976 observed age is by construction left censored at 1975.
Firm age is computed for all firms in the LBD from the age of the establishments belonging to that particular firm. A firm is assigned an initial age by determining the age of the oldest establishment that belongs to the firm at time of birth. Firm age accumulates with every additional year after that. Note that mergers and acquisitions and divestitures could lead to abrupt changes in firm age purely from establishment composition issues if we defined firm age in each year using age of the oldest establishment owned in that year.