Commerce Research Of Arizona Businesses

Arizona's economy is dominated by self-employed entrepreneurs with no employees, according to research released today by the Arizona Department of Commerce. Growth of major firms (employing more than 500) has slowed, although they continue to employ more than half of the state's workers.

Other key findings from the study "The Number of Businesses in Arizona" include: during 2003. More than 3-fourths of these businesses consisted of self-employed individuals who had no employees. The figure likely has grown to a little more than 100,000 in 2006.

"This report provides a snapshot of Arizona's business climate," said Gilbert Jimenez, Director of the Arizona Department of Commerce. "It establishes a necessary starting point to further evaluate business growth & its impact on the overall state economy."

"The determination of the number of businesses operating in Arizona is not a straight forward proposition due to data deficiencies & definitional issues," said Tom R. Rex, associate director of the Centerfor Competitiveness &d Prosperity Research at A.S.U., who prepared the report. "The best data - from the U.S. Census Bureau -are more than 2 years old."

The Census Bureau data are divided into 2 series: businesses with employees & non-employer businesses. Each series is based on administrative records. While neither series is affected by sampling error, both are subject to non-sampling error. Certain industries are excluded from each series.

The Census Bureau estimated that 316,351 non-employer businesses were operating in Arizona in 2003. The 2006 figure likely exceeds 350,000. The identification of non-employer businesses largely is based on self-employment income reported to the Internal Revenue Service. "Since not everyone reporting self-employment income operates a business, the Census Bureau must make a number of assumptions in deriving its estimate of the number of businesses without employees," Rex said.

"The number of active businesses in Arizona has increased in each recent year, with the annual rate of growth related to the economic cycle,"said economist Kent Ennis, senior director of strategic investment & research at the Arizona Department of Commerce. More than half of the businesses in Arizona with employees in 2003 were very small, employing fewer than five. Less than 3% employed 500 or more. Including businesses without employees, the figures were even more extreme, with 90% of businesses having fewer than 5 employees & less than 1% having at least 500.

The U.S. Small Business Administration's definition of a small business- fewer than 500 employees - includes nearly all businesses. Yet, close to half of the total employment in Arizona in 2003 was at the less than 1% of businesses with at least 500 employees. Employment growth between 1993 & 2003 was greater - both numerically & on a percentage basis - at the less than 1% of businesses with at least 500 employees than at all other businesses combined.

"The Number of Businesses in Arizona" report is available at www.azcommerce.com.