Analysis: Slower Job Growth Closes Out 2017, Entrepreneurship is on the Rise

By at 5 January, 2018, 11:04 am


by Raymond J. Keating-

The latest jobs report released on January 5 from the U.S. Bureau of labor Statistics revealed that the U.S. economy experienced rather lackluster job growth in the final month of 2017. However, the report shows positive gains in entrepreneurship in recent months.

The jobs report actually is two reports in one. First, there’s the establishment, or payroll, survey, and second is the household survey. The payroll survey tends to grab considerable media attention in terms of topline employment gains or losses, while the much-quoted, though largely useless, unemployment rate comes from the household survey. But, while it tends to be more volatile from month to month, the household survey actually provides the most significant information on the jobs front, as it tends to better represent startup and small business activity, while also serving up key labor force and employment trends and ratios.

Key Points and Takeaways:

● As for the establishment survey, nonfarm payrolls (seasonally adjusted) were up by 148,000 in December 2017, which was down from gains of 252,000 in November and 211,000 in October. During a strong recovery/expansion period, monthly payroll gains should top 250,000. For the past year, from December 2016 to December 2017, payroll employment grew by a respectable 2.055 million.

● As for the household survey (seasonally adjusted), December 2017 saw an employment increase of only 104,000. And from December 2016 to December 2017, employment expanded by a middling 1.79 million. The employment-population ratio came in at 60.1 percent in December, unchanged from November, and down from 60.4 percent in September, but up from 59.8 percent a year earlier. For perspective, prior to the last recession, the employment-population ratio ran around 63 percent.

● While the civilian noninstitutional population expanded by 160 million in December, the labor force grew only by 64 million. Meanwhile, the labor force participation rate registered 62.7 percent in December 2017, unchanged from November as well as from a year earlier. In fact, the rate stood at 62.7 percent in December of 2015 as well. To put this in context, again prior to the last recession, the labor force participation rate had topped 66 percent.

Positive Trends for Entrepreneurship:

Finally, recent months point to positives on the entrepreneurship front, at least as measured by the number of self-employed. As for unincorporated self-employed (seasonally adjusted), the bad news is that the December 2017 level of 9.763 million was actually down from the 9.772 million in December 2016. However, from a recent low of 9.196 million in July 2017, growth was strong in the subsequent five months – again rising to 9.763 million at the end of the year.

As for incorporated self-employed, since the data is not seasonally adjusted, we’re basically limited to the year earlier comparison. From March 2017 through December 2017, the number of incorporated self-employed was up from a year earlier. And in December, incorporated self-employed stood at 6.047 million, up by 212,000 versus December 2016.

Looking at annual averages, incorporated self-employed registered 5.845 million in 2017, a notable gain from 5.643 million in 2016, and the sixth consecutive year of growth. Indeed, it is worth highlighting that the 2017 level of 5.845 million finally tops the previous annual high of 5.784 set in 2008. On the unincorporated self-employed front, though, 2017 came in at 9.526 million, down from 9.604 million in 2016, and it was the first annual decline since 2014. Looking back to the 1970s, the previous annual high registered 10.648 million in 1994, followed by 10.586 million in 2006.

In each area noted here – employment, labor force and entrepreneurship – the U.S. still needs to see significant gains in coming years to regain normal levels achieved in a healthy economy.

With positive tax changes occurring at the start of 2018, along with continued efforts for regulatory reform and relief (such as rolling onerous ObamaCare measures), the policy environment should further incentivize increased entrepreneurship, private investment, and job creation.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP:  The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.


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