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Unlike most cities, Charleston has added businesses since the recession

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Their new company had graduated from a garage to a warehouse, and it had gone from a nights-and-weekends pursuit a full-time endeavor.

So last fall, Jim Luby and Drew Wynne decided to quit their jobs.

Barista Vending had gone from selling iced coffee at the farmers market to distributing kegs of their cold brew to cafes and technology startups. They were doing something different - commercial-scale production of a hip coffee trend - so they decided to make a go of it.

The company was one of about 1,700 businesses in the Charleston area that opened their doors in 2014, census data show, more than making up for the nearly 1,400 that closed. Every year since 2011, the Lowcountry has finished with more firms than it started with.

That's how it's supposed to work. The growth of new businesses leads to more jobs and more competition, and the high level of turnover means that newcomers like Luby and Wynne are getting a chance to challenge older players and try something new - like, say, filling kegs of coffee for office workers.

But in that regard, places like Charleston are becoming a rarer breed, according to a study of "economic dynamism" released this month by the Economic Innovation Group, a Washington, D.C., think tank.

Only a third of cities across the U.S. have been gaining new businesses since the recession, the study found. The Charleston metro area was the only one in South Carolina showing positive growth, and the state as a whole a saw more firms close than open between 2010 and 2014.

In that way, South Carolina was largely a reflection of the rest of the country, said John Lettieri, the think tank's co-founder.

Business formation was declining before the Great Recession, but it has collapsed since. Even as most other measures of the economy have rebounded, the number of entrepreneurs striking out on their own still hasn't.

Like South Carolina, business formation across the country has been largely concentrated in just a few places. Nationally, half of the U.S.’s new businesses came from just five cities - Dallas, Houston, Los Angeles, Miami and New York.

Typically, business formation has been widely distributed. Before the recession, South Carolina was posting positive growth, and a majority of cities were, too.

"What you see in the 'macro' of the U.S. is also playing out in South Carolina," Lettieri said. "Relatively speaking, it’s doing pretty well compared to the rest of the country. It’s just that the rest of the country has seen a big downturn in this kind of dynamism. So South Carolina in many ways is indicative of that same challenge."

To be sure, a slowdown in startup activity after the recession doesn't mean that the economic picture is particularly dark. The labor market is nearing full employment, and wage growth is picking up. The economy as a whole is steadily expanding, though at a relatively slow rate.

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But the slowdown in new businesses opening up raises concerns about the economy’s future vitality, Lettieri says. Startups, after all, find ways to improve the status quo and increase competition, helping push wages higher and prices lower.

And this far into an economic recovery, Lettieri says there should be some concern that the drop in new business creation is going from being a short-term hiccup to a new, longer-term reality.

"It suggests what was a cyclical shock maybe now is veering into a fundamental structural change for the worse,” Lettieri said. "This is nothing like anything we've seen in any previous recovery period on record."

Without as many new companies, the report says, the group fears losing a dynamic that makes sure that the economy "evolves rather than calcifies."

In Charleston, for instance, technology startups have cropped up looking to change everything from accounting and human-resources paperwork to bar tabs and reservations. New shops open to keep up with trends, and upstart restaurants push new styles.

The growth reflects a strong local economy, said Mary Graham, chief advancement office at the Charleston Metro Chamber of Commerce. It suggests that entrepreneurs feel secure enough to take a risk, and that they think there’s a strong enough market to tap.

"That’s sort of the underpinning. If you can’t support a startup and local business enough to be successful, you can’t really expect attract business either," Graham said. "That climate has really started developing."

Barista Vending reflects that trend doubly.

Its growth has largely been fueled by new software companies, selling kegs to startups who want to give workers a Silicon Valley-style perk. And it plans to grow itself: If business keeps chugging along and those startups keep hiring, Luby says he and Wynne plan to hire their first employee later this year.

And while Barista is still a two-person operation in a walk-in fridge in North Charleston, its co-founders have spent months tweaking their process works and thinking about how to design a system that can handle more volume than the 200 or so gallons a week they’re making now.

"We find something out new every month, something in the process that can be improved," Wynne said.

For Charleston to keep a dynamic economy, that’s how it’s supposed to work.

Reach Thad Moore at 843-937-5703 or on Twitter @thadmoore.

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