New-Business Filings in California Reach Highest Level of the Decade

In another good sign for California’s economy, business incorporations rose to their highest level of the decade during the first quarter.

A total of 13,788 newly incorporated businesses were formally registered with the secretary of state during the first three months of the year, a 5.2% increase over last year’s first quarter, according to data collected by CDB Infotek, a Santa Ana-based business data firm.

Los Angeles and Orange counties also reported record-high numbers for the ‘90s, which began with a severe business downturn. Both surpassed the statewide numbers, with Los Angeles County tallying a strong 8.9% increase and Orange County 5.9%.

If the trend continues for the entire year, according to CDB, business incorporations could reach a healthy 49,000 statewide, a hefty increase over the deep slump of 40,900 filings recorded in 1991, said company analyst John Karevoll.

According to CDB data, yearly incorporations ranged from 43,238 in 1990 to a high of 47,602 in 1994. That compares with the state’s peak in 1986 of 63,691, according to CDB data.

“The trends are now that we’re climbing,” Karevoll said. “Business is coming back.”

Incorporations typically reflect both job creation by entrepreneurs and job substitution as unemployed and laid-off workers scramble to create their own companies, Karevoll said.

With at least four years of recession, job losses and corporate restructuring behind the state, the recent incorporations are “clearly job generation instead of job substitution,” Karevoll said.

Continued downsizing this year, such as the layoffs that will come as Wells Fargo and First Interstate banks complete their merger, will be minor compared with severe losses earlier in the decade, he added.

Statewide, the increase in business filings was strongest in the Central Valley, which showed a 12.8% increase. In the Bay Area, where new-business filings were slightly higher two years ago, last quarter’s number was up only 1.6%.

But incorporations were significantly down in Riverside and San Bernardino counties, by 22.1% and 9.5%, respectively.

Karevoll said those two counties depend on economic spillover from Los Angeles and Orange counties. He said the inland counties should pick up in the summer and fall as their neighboring counties continue to grow, he said.

Gordon Palmer, chairman of the Economic Advisory Council for the California Chamber of Commerce, said the numbers are evidence that the California economy is on the mend.

“L.A. County has lagged furthest behind in the recession,” Palmer said. “Northern California started to come out of the recession earlier, so it’s a good sign to see growth in [Southern California’s] numbers.”

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Start-Ups Inc.

Most Southern California counties showed a sharp year-over-year increase in business incorporations in the first quarter, although inland counties dropped sharply.

*--*

County/region 1st qtr. ’95 1st qtr. ’96 % incorps. incorps. change Los Angeles 5,347 5,822 +8.9% Orange 1,485 1,573 +5.9 San Diego 948 1,033 +9.0 Riverside 339 264 -22.1 San Bernardino 264 239 -9.5 Ventura 212 220 +3.8 Imperial 21 18 -14.3 Southern California 8,616 9,169 +6.4 Statewide 13,107 13,788 +5.2

*--*

Source: CDB Infotek