WASHINGTON, D.C. – Small businesses are the lifeblood of the U.S. economy: they create two-thirds of net new jobs and drive U.S. innovation and competitiveness. A new report shows that they account for 44 percent of U.S. economic activity. This is a significant contribution, however this overall share has declined gradually.
U.S. gross domestic product (GDP) is the market value of the goods and services produced by labor and property located in the United States. Across the 16 years from 1998 to 2014, the small business share of GDP has fallen from 48.0 percent to 43.5 percent. Over the same period, the amount of small business GDP has grown by about 25 percent in real terms, or 1.4 percent annually. However, real GDP for large businesses has grown faster, at 2.5 percent annually.
“This useful benchmark shows us that small businesses continue to be big contributors to the U.S. economy,” Acting Chief Counsel for Advocacy Major L. Clark said. “While their contribution has grown at a slower rate than that of large businesses, small businesses continue to be at the forefront of driving innovation, jobs and economic growth.”
Nominal small business GDP measured $5.9 trillion in 2014, the most recent year for which small business GDP data are available. The three largest small business sectors contributing to it were (1) the real estate and rental and leasing industry; (2) wholesale and retail trade; and (3) the manufacturing and mining sector.
The 2008 recession played a small part in the lower small business share, but structural changes may have played a part as well. These factors include long run declines in business dynamism, the rise of big-box stores, the changing regulatory environment and the critical role of credit availability.
The full report, “Small Business GDP, 1998-2014,” and a summary of the research, are available on Advocacy’s website. Advocacy has sponsored research on small businesses’ contribution to GDP since 1980.
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