Firm migrations in the United States: magnitude and trends

Several U.S. federal statistical programs, including the American Community Survey (ACS) and Current Population Survey (CPS), provide statistics on internal migration and geographic mobility for the United States. These data describe population flows between states, describe the reasons for moving, and provide demographic profiles of those crossing state and county lines. Although population migration statistics are a useful proxy for internal shifts in economic activity, they leave unanswered questions on business migrations: What types of businesses move? Where are they going? And where did they come from? This article is an attempt to fill these data gaps using data from the U.S. Bureau of Labor Statistics (BLS) longitudinal Quarterly Census of Employment and Wages (QCEW) program. In what follows, we measure the magnitude of business migration across regions and highlight the characteristics of those businesses.³ We show how business migration has trended over time, in what specific industries and regions migrant businesses are concentrated, and how their employment and wages compare with the rest of the economy.

We also provide a background on the data source, a brief description of our methodology, a historical look at firm migration, and an analysis of recent migratory patterns of firms in the United States. We offer analysis by census region and at the state level. We conclude by highlighting characteristics of migrating firms, offering a summary of findings, and suggesting avenues for future research.

How are migrating firms identified?

Business migration statistics are derived from the QCEW program. Each quarter, the QCEW collects establishment-level employment and wage data from state unemployment insurance (UI) programs, providing a veritable economic census of employees on nonfarm payrolls. Thus, the QCEW data cover 98 percent of all nonfarm employees. In the third quarter of 2021, QCEW reported 145 million employees working at 11 million establishments.⁴

QCEW statistics are based on mandatory quarterly reports on employment and wages submitted by employers subject to UI laws. These records are reviewed, updated, and compiled in a longitudinal database (LDB), allowing for production of high-quality, accurate, and timely economic statistics.

The Business Employment Dynamics (BED) program links QCEW establishment-level records to construct an LDB of businesses in the United States. By means of unique identifiers, establishment records are linked across time, allowing for the measurement of gross job gains and gross job losses, as well as establishment entries and establishment exits across industries and states. The LDB is considered the BLS business register and serves as the establishment sampling frame in a number of BLS surveys and as the benchmark for the Current Employment Statistics program.⁵

The BED program identifies migrating firms using the BLS business register. A firm, defined as all establishments sharing a unique Employer Identification Number (EIN) issued by the Internal Revenue Service, is considered to have migrated during the reference year if it is in a different state in the first quarter than in the first quarter of the preceding year. This process restricts our data to single-establishment firms because a multi-establishment firm may move establishments in and out of states as part of an expansion or contraction and not necessarily for the purpose of migration. We define an establishment as a single physical location where one predominant economic activity occurs and a firm as an entity consisting of one or more establishments sharing a unique EIN.⁶ Consequently, other forms of business migration, such as a multi-establishment firm shifting business headquarters across state lines, are not captured by these statistics.

Single-establishment migrant firms, as defined above, are also counted as births in the states they move to and deaths in the states they come from, according to BED definitions. As such, migrant firms are a subset of establishment births and establishment deaths, which by themselves are a subset of establishment openings and closings.⁷ Because establishments are not linked across states, births include entirely new establishments and those that have migrated into a state. Likewise, deaths include establishments that have gone out of business or have moved out of the state.

How has business migration changed over time?

As shown in chart 1, the level and rate of single-establishment firm migration, especially since 2009, has risen dramatically. In 1994, the earliest year for which this time series is available, a total of 3,261 firms crossed state lines. In 2021, this level more than doubled to 6,384 firms. Employment from migrant firms has also risen over this period.

The trends in the number of migrant firms and their employment have some business cycle properties. The number of migrant firms fell during the 2001 and 2007–09 recessions.⁸ These decreases were similar to patterns seen in previous recessions, as economic slowdowns lower most business activities, including migration. However, in the COVID-19 pandemic-induced recession of 2020, the number of firm migrations rose sharply. As we shall see, the rise was especially pronounced in the professional, scientific, and technical services industry sector.

The annual number of firm migrations is not large in magnitude when compared with the number of establishment openings or births. To add context, we compare the number of firm migrations and their employment with the number of establishment births and their employment. As firm migration increased in the aggregate, the number of establishment births increased as well. In 1994, there were only 43 firm migrations for every 10,000 establishment births. This number rose to 58 in 2021. (See chart 2.)

Although the magnitude of firm migration is small relative to the number of births, annual firm migrations have grown faster than births. As shown in chart 3, the trend and direction of changes in establishment births and firm migrations are similar. However, firm migration’s growth index is much higher relative to establishment births. By 2021, firm migrations stood at 196 percent of their 1994 levels, whereas establishment births were at 147 percent of theirs.

These data exhibit strong cyclical properties. In both the 2001 and 2007–09 recessions, the level and rate of firm migration fell. In 2001 and 2008, firm migration fell by 0.3 percent and 6.4 percent, respectively.⁹ In 2021, when the COVID-19 pandemic began, however, this relationship flipped, and a dramatic increase in firm migration was observed. Overall, 860 more firms migrated in 2021 than in 2020, an increase of over 15 percent.

Where do firms migrate?

To understand the pattern of firm migration across the United States, we used the four U.S. regions (Northeast, Midwest, South, and West) of the Census Bureau and tracked firm movement interregionally (between regions) and intraregionally (within regions).¹⁰ In 2021, more firms migrated between regions than within them. A total of 3,011 firms (47.2 percent) engaged in intraregional migration in 2021, compared with 3,373 firms (52.8 percent) migrating interregionally.

In every region except for the South, fewer than 50 percent of migrating firms moved intraregionally. (See table 1.) The share is lowest in the Midwest, where 36.8 percent of migrating firms moved into another state within the same region. In the South, intraregional migration is the highest, where the rate is 57 percent. The region with the next highest level of intraregional migration, the West, saw 47.5 percent of migrating firms move within the region. In the Northeast, that number was 41.9 percent.

Table 2 shows data on population migration from the Census Bureau ACS. From 2015 to 2020, about 90 percent of population movers moved within the same regions, much higher than the 47.2 percent for the firm migrations. The reason for this gap is the fact that firms may move for reasons different than those of population movers. For firms, the underlying motivation may be mostly economic, while people move for a variety of reasons, including establishing their own households, attending school, changing marital status, and so on. However, in both firm and population migrations, the South region as a destination has the highest share of total interregional movements.

When tracking firm migrations across regions, we measured the number of firms moving in (in-migration), the number of firms moving out (out-migration), and the net migration, which shows the net gains or losses for the region. Table 3 shows the migration flows including inflows, outflows, and net migration across the regions.

Intraregional migrations do not have direct impact on the count of net migration. However, the regions with the highest levels of intraregional migration are also the regions with the highest levels of net migration (See chart 4). In most years since 1994, the South and West experienced the highest net migration of firms while the Northeast and Midwest witnessed the least. Differences in net migration between regions narrowed during the 2001 and 2007–09 recessions but widened again during the subsequent economic recoveries. Prior to the COVID-19 pandemic and recession, net migration began to rise in the South and to drop in the Northeast. In 2020, these gaps expanded, leading the South to witness an all-time high (for years in which we have data) of 713 firms moving into the region, on net. Out-migration from the Northeast accelerated: on net, 384 firms left the region. At the same time, net migration to the West sunk into negative territory, with 175 firms migrating out, on net. The Midwest experienced little change in its net firm migration figures, but it continued to witness more out-migration than in-migration.

The South had the highest cumulative net migration. Between 1994 and 2021, 5,635 firms migrated into the South, on net. The only other region to experience positive net migration during this period, the West, had 1,168 firms migrate into the region, on net. The Northeast and Midwest, respectively, had a net loss of 4,018 and 2,785 firms over this period. A large share of these firm migrations occurred between 2008 and 2019, with a sharp increase during 2021.

As chart 5 shows, out-migration and in-migration followed similar trends in all regions, but the regions showed considerable differences in the gap between the two series. The size of these gaps indicates the difference in the number of incoming and outgoing firms among the regions. In-migration exceeds out-migration in the South, out-migration exceeds in-migration in the Northeast and Midwest, and out-migration and in-migration were generally at similar levels in the West. The Northeast and Midwest consistently saw out-migration outpace in-migration. The migration levels of the two regions rose and fell in similar patterns, but their overall levels of migration were much lower than those in the South and West. For a time series of in-migration, out-migration, and net migrations across regions see table 3.

State-level patterns mirrored regional migration flows. The two states with the highest levels of net migration in 2021—Florida and North Carolina—are in the top gaining states in the South region. These two states experienced positive net migration flows equal to 399 and 148 firms, respectively. (See chart 6.)

In Florida, firm migration trends reflected those of the broader South. Except for the 2006–08 period, in-migration surpassed out-migration. The levels and rates of migration flows rose steadily over time and surged during 2021. (See chart 7.)

On the other hand, New York, with 485 firms leaving the state on net, had the highest level of negative net migration. Migration trends in New York mirrored those in the Northeast. Outward firm migration eclipsed inward migration every year in the 1994–2021 period. In 1994, 158 firms entered the state as 291 left it. In 2021, 198 firms migrated into the state while the number leaving increased to 683 firms. (See chart 8.)

What characteristics typify migrating firms?

Firm migration has been higher in the professional, scientific, and technical services industry sector than it has been in other industries. Businesses in professional, scientific, and technical services conduct activities that require a high degree of training and expertise, such as legal advice and representation; accounting, bookkeeping, and payroll services; computer services; consulting services; and research services to clients in a variety of industries.¹¹ In 1994, 16 percent of all migration was in this sector. In 2010, this share rose to 28 percent. In 2021, it reached an all-time high of 30 percent. As shown in charts 9 and 10, most of the growth in firm migration occurred in this sector, causing the industry’s share of overall migration to rise. In 2021, firm migration in the professional, scientific, and technical services was 390 percent of its 1994 levels, compared with 145 percent for all other industries.

Migration patterns at the industry level exhibited the same cyclical patterns as firm migration at the national level in the 2001 and 2007–09 recessions: firm migration fell across all industries. During the 2020 recession, however, migration increased dramatically, mostly in the professional, scientific, and technical services industries.

Over time, the average employment of migrating firms has steadily decreased. Between 1993 and 2001, migrating firms’ average employment hovered between 7 and 10 employees. Following the 2001 recession, average employment dropped, bottoming out at five employees in 2005. After the 2007–09 recessions, average employment continued to hover near five employees, but dropped to four employees in 2016. In contrast to the cyclical trends exhibited in the overall levels of firm migration, the average employment of migrating firms continued to fall during the 2020 recession. Compared with establishment births, migrating firms have had consistently higher levels of average employment. However, the average employment for each group of businesses has fallen at the same rates over time. In 2021, the average employment of both establishment births and migrating firms hovered slightly under 50 percent of their 1994 levels. (See chart 11.)

Summary

Using the longitudinally linked QCEW data, we measured the annual number of single establishments and their employment and wages for those firms that moved across states and regions from 1994 to 2021. Migrant firms are presented by their states and regions of origin and destination and by their industry sectors. We found that in 2021, a total of 6,384 firms moved across state borders, almost twice the number than in 1994. As a percentage of the total firm population, the migrant share rose from 0.07 percent to 0.12 percent during this period. In 2020, more than 30 percent of migrant firms were in the professional, scientific, and technical services sector. Data show that the number of migrant firms generally grows in expansionary periods and declines or shows less growth during economic downturns. However, in the 2020 COVID-19 pandemic-induced recession, the number of migrant firms rose sharply. Although migrant firms move in and out of every state and region, data from 1994 to 2021 show that in-migration in the South has been consistently higher than out-migration. In the Northeast and Midwest regions, out-migration exceeded in-migration. In the West, in-migrations and out-migrations were generally in balance.

Data on firm migrations help paint a fuller picture of the changing labor market and overall economy. In this article, we provide insight on the nature and magnitude of the migratory firms. However, this analysis was limited in scope to single-establishment firms. Future research should develop a methodology to allow for estimates of migration at larger, more complex business entities—that is, firms with multiple establishments.