Declining Size of Establishments

Declining-Size-of-EnterprisesThe Declining Average Size of Establishments

Bureau of Labor Statistics
Eleanor J. Choi and James R. Spletzer

First published March 2012

Keen observers of labor market statistics have noticed that the average size of establishments has been decreasing over the past decade. The average size of establishments rose through each of the expansionary years of the 1990s but then fell slightly during each year of the 2000s regardless of whether the economy was expanding or contracting. The opposing trends of these Bureau of Labor Statistics (BLS) data suggest that the U.S. economy has changed in some fundamental way during the past two decades.

In this article, we seek to understand the change in trend in the average size of establishments during the last two decades. We begin with an exploration of the robustness of the basic empirical facts—we document the data used to discern the trends in the average size of establishments, and we show that a similar change in trends has taken place in the average size of firms. We also show that publicly available Census Bureau data on the average size of establishments and firms show trends similar to those of the BLS data, and we use the Census Bureau data to show that the trend of the 1990s was similar to those in the late 1970s and the 1980s.

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