Business and employment dynamics data, 2022
Released: 2024-12-17
Business exit rate at its lowest level in two decades in 2022
The number of business openings edged up in 2022 from a year earlier, while business closures declined for the second straight year.
Canada's private sector was stable in 2022, with the entry rate (new businesses) edging up 0.2 percentage points from 2021 to 13.9%, bringing it 2.4 percentage points above its trough of 11.5% in 2020 and exceeding the 2002-to-2019 average of 13.5%.
The exit rate (business exits) decreased for the second consecutive year to settle at 10.8% in 2022, its lowest level in two decades. The exit rate was 1.3 percentage points below its 2021 level and 3.1 percentage points lower than its 13.9% peak observed in 2020, during the first year of the COVID-19 pandemic. In 2022, the exit rate was 1.2 percentage points below its pre-pandemic average.
Chart 1
Entry and exit rates, Canada, private business sector, 2002 to 2022
Net employment growth remains positive as employment creation exceeds employment destruction
Private sector net employment, that is, the overall change in full-time equivalent employment among private sector employers, grew by 7.1% in 2022, following a 5.6% increase in 2021 and a 9.9% decline in 2020. This growth results from changes in four key subcomponents: employment creation by entrants, employment creation by growing incumbent businesses, employment destruction by exits and employment destruction by declining incumbents. Consistent with trends over the last two decades, most of the fluctuation or turnover in private sector employment was driven by the expansion and contraction of incumbent businesses.
Gross employment creation reached 14.4% in 2022, its highest level in two decades. Incumbent businesses drove this employment creation, contributing 12.8 percentage points to the overall gross employment creation. New businesses, or entrants, played a more modest role in employment creation, contributing 1.5 percentage points. This smaller share reflects the fact that new businesses tend to enter the market with relatively few employees and expand over time.
Chart 2
Gross employment creation by business status, 2002 to 2022
On the other hand, gross employment destruction was 7.2% in 2022, down from 8.2% in 2021, but well below the record high of 17.3% in 2020. Exits (accounting for 1.0 percentage point) contributed minimally to gross employment destruction in 2022, which again reflects the impact of smaller businesses, which typically exit with fewer employees.
Most of the gross employment destruction came from incumbent businesses downsizing, accounting for 6.2 percentage points. This shows that while many businesses grew, some incumbent businesses faced obstacles, possibly related to supply chains, rising inflation, rising cost of inputs, rising transportation costs, hiring and retention, or challenges with adjusting to post-pandemic demand shifts.
Chart 3
Gross employment destruction by business status, 2002 to 2022
Data on business dynamics
These annual data provide a longer time frame for analysis, enabling comparisons with the 2001 recession and the 2008/2009 financial crisis. They also allow for calculations of employment creation and destruction, as well as metrics not available in the monthly data. Additionally, the annual series incorporates further details to track businesses across calendar years, yielding more accurate estimates.
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Note to readers
The statistical series presented in this table may be revised slightly from one version to another. These revisions may result from various factors, such as adjustments in business structure or the availability of new information.
The private sector covers all industrial sectors except those primarily involved in educational services, health care and social assistance, and public administration. It includes unclassified businesses.
Annual business entry and exit estimates and monthly estimates of business openings and closures are available. The two are related but present some differences. The annual estimates are based on the Longitudinal Employment Analysis Program, which uses T4 records and statistical enterprises from the Business Register to create longitudinal files of firms. The availability of the annual T4 data allows for the creation of additional longitudinal links of firms between apparent exits and entrants that share a large percentage of employment. See "The Measurement of Firm Entry in the Longitudinal Employment Analysis Program" for more details. In contrast, the monthly estimates of business openings and closures are based on the Business Register and the monthly PD7 payroll deduction files. These monthly data provide timely insights into business dynamics and offer a view of fluctuations, highlighting seasonal patterns and short-term trends. They can also reveal sectoral and geographic disparities in business activity and allow for more frequent trend analysis, thereby supplementing the broader insights gleaned from annual data. Furthermore, the definitions of opening and closure are based on the month-to-month change in the employer status of a business, while the definitions of entrant and exit are based on the employer status of a business over a longer period.
For more information on the monthly estimates of business openings and closures, see Monthly Business Openings and Closures.
Contact information
For more information, or to enquire about the concepts, methods or data quality of this release, contact us (toll-free 1-800-263-1136; 514-283-8300; infostats@statcan.gc.ca) or Media Relations (statcan.mediahotline-ligneinfomedias.statcan@statcan.gc.ca).
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