PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Resilient Fulltime Entrepreneurs During the Pandemic: Sorting Through the Data

By at 17 August, 2022, 9:34 am

SMALL BUSINESS INSIDER

by Raymond J. Keating –

As we piece together the puzzle on entrepreneurship during the pandemic, the numbers indicate resiliency among fulltime entrepreneurs.

Sorting through and making sense of the data and trends on entrepreneurship in the U.S. can be confusing at times. After all, there are numbers from the U.S. Census Bureau and the U.S. Bureau of Labor Statistics, and they differ widely.

So, let’s sort some of this out, and get to some basic takeaways.

First, the Census Bureau offers up numbers on employer firms and nonemployers. Second, the BLS presents data on self-employment – both unincorporated and incorporated self-employed. Third, the nonemployer numbers from the Census Bureau are sole proprietorships (no employees and payroll). Since these nonemployer data are based on tax returns, an individual could have more than one business and a nonemployer business doesn’t have to be a person’s main job, i.e., it can be a side business. Fourth, BLS self-employment numbers capture individuals whose primary occupation is owning a business, and again, that business can be unincorporated or incorporated. Also, self-employed can be sole proprietors or have payroll.

So, in the end, the Census data is valuable in that it captures the widest spectrum of the number of businesses in the U.S. – both employers and nonemployers. Meanwhile, the BLS self-employment data is important in capturing essentially individuals who are fulltime entrepreneurs.

Finally, regarding the data itself, self-employment numbers are updated monthly, while there is a significant lag in the Census data, for example, the latest employer and nonemployer data are from 2019. In addition, incorporated self-employment numbers only go back to 2000, and those numbers are not seasonally adjusted, while unincorporated self-employment data are seasonally adjusted, and go back to 1948.

As we try to sort through what’s been happening on the entrepreneurship front since the pandemic hit, the Census Bureau data on employer firms and nonemployers again only go to 2019. So, these numbers are not yet relevant. Therefore, we are left considering what’s happened regarding the self-employed, that is, those who say that their main job is owning a business, again, what we might call fulltime entrepreneurs.

Since the unincorporated self-employment data are not seasonally adjusted, we’ll look at total averages based on unincorporated plus incorporated self-employment (both not seasonally adjusted).

● During pre-pandemic 2019, total self-employment (annual average) registered 15.72 million (9.54 million unincorporated plus 6.18 million incorporated).

● That total declined to 15.53 million in 2020 (9.25 million unincorporated plus 6.28 million incorporated), when the pandemic struck.

● In 2021, the total increased to 16.07 million (9.96 million unincorporated plus 6.12 million incorporated). That was higher than the 2019 pre-pandemic level.

Source: U.S. Bureau of Labor Statistics data, calculations by author

To look at 2022 data, we can compare the averages for the first seven months of the year. (See above chart.)

● For January to July of 2019, total self-employment averaged 15.56 million (9.48 million unincorporated plus 6.09 million incorporated).

● In 2020, that total declined to 15.40 million (9.06 million unincorporated plus 6.34 million incorporated).

● That increased in 2021 to 15.84 million (9.81 million unincorporated plus 6.04 million incorporated) – moving ahead of the pre-pandemic 2019 data.

● So far in 2022, the total grew further, hitting 16.45 million (9.91 million unincorporated plus 6.54 million incorporated).

By the way, these totals line up at least directionally with the higher levels of new business applications the U.S. has experienced after the pandemic first struck. (See SBE Council latest on business applications here.)

For comparison purposes (since we’ve had complete data starting in 2000), the high for total self-employed came in 2007 at 16.15 million. Depending on what happens for the rest of this year, that high could be surpassed in 2022. That would be welcome news, but it also pays to keep in mind that this still would amount to no real growth in fulltime entrepreneurship for a decade-and-a-half.

In the end, though, at least during this pandemic economy, the self-employment data point to a resiliency among fulltime entrepreneurs as we work to recover and fight off a recession and high inflation. That’s a plus for the economy now and going forward.

As we’ve said before regarding policymaking, it would be nice if the Biden administration and Congress would help by providing tax and regulatory relief for entrepreneurs and investors, as opposed to raising costs and creating more obstacles.

Indeed, for most of the past 15 years, federal policymaking has moved in an anti-entrepreneurship direction, thereby explaining part of the reason for the relative decline in the level of entrepreneurship. Get the policies right – namely, low taxes, light regulation and free trade – and that will help to unleash the American entrepreneurial spirit.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest book is The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist.

 

 

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