by Dr. Kelley Cullen
New Business Applications is a new indicator that we have just added to most of our county trends sites. To help capture economic development in a region, annual new business applications and annual growth rates are now being tracked at Chelan-Douglas Trends. While applications do not always result in actual business starts, data on business starts are not available at the county level. But business applications are tracked, and the discrepancy is likely small. Additionally, the two data series should trend the same over time.
The creation of businesses is an important measure of a region’s economic health. Information about a region’s business creation, via this version of the measure, is now regularly collected by the U.S. Census. Typically, one would like to observe high levels of new firms created in a local economy, as this points to a bent for entrepreneurship or business risk-taking. In part, because every year, firms go out of business due to a variety of reasons. To fill their place, either established firms from out of the county or new firms created within the county are needed. If the number of new businesses climbs beyond replacement levels, all the better.
Data on new business applications for the states and their counties can be found at the Business Formation Statistics at the US Census Bureau. Chelan-Douglas Trends 2.2.5 New Business Applications presents data for the combined counties as well as for the two counties separately. The combined counties are benchmarked against the state average. Additionally, the EWU Institute for Public Policy & Economic Analysis (IPPEA) presents the same data for other counties across eastern Washington to include Benton & Franklin, Spokane, Grant, Northeast Washington, Walla Walla and Whitman.
The graph of annual total number of new business applications since 2005, tells a story of two different trends. For the first half, from 2005 to 2016, the number of new business applications was quite flat at around 740 new applications per year, a meager 0.5% annual growth rate. But then starting in 2017, new business applications started to take off in the combined counties and in the most recent year of 2023 saw over 1,100 applications. The average annual growth rate from 2017 to 2023 was 7.9% which exactly matched the state average over the same period.
While Chelan County sees the larger number of total permits annually, just over 70% of the 1,100 combined applications, it is Douglas County that has seen the fastest growth rates. For the first half of the time series (2005 to 2016), Douglas County saw an annual rate of increase of over 2% compared to Chelan County’s zero growth rate. When things were heating up from 2017 to 2023, Douglas County saw average annual growth of 9.4%, compared to Chelan’s 7.3%.
This robust growth in new business applications was also felt in neighboring counties across eastern Washington. Not surprisingly, Spokane County saw the greatest increase in new business applications with a 13.7% average annual increase since 2017. In 2023, Spokane County saw an increase of over 20% from the previous year’s total.
Benton & Franklin combined counties averaged over 9% annual growth in new business applications since 2017 with other counties such as Grant, Whitman, Walla Walla, Pend Oreille, Stevens and Ferry coming in around the same 7-8% as Chelan & Douglas.
This strong year-over-year increase in the number of new business applications bodes well for the local economy and even across the region and state as well. The data trends seem to suggest that the region, and the state more broadly, are amenable to new business opportunities that could lead to further economic development.
This is important because the formation of new businesses is vital to a dynamic local economy. New businesses provide employment and income for residents as well as can be a source of travel and tourism spending from visitors.