New Business Applications Stalled in October, But Growth Trend Remains

By SBE Council at 13 November, 2023, 8:54 pm

by Raymond J. Keating –

New business applications warrant watching because they serve as an estimate or predictor of actual new business creations.

The U.S. Census Bureau’s latest report shows business applications (i.e., “business applications for tax IDs as indicated by applications for an Employer Identification Number (EIN) through filings of the IRS Form SS-4”) stalled in October.

High-propensity business applications – that is, business applications most likely to turn into firms with payroll – actually declined in October by 3.3 percent.

However, as noted in the two following charts, new business applications – both total and high-propensity – the trend remains not only good, but robust. And that not only is the striking comparison to pre-pandemic levels, but also growth since the end of last year.

Source: Federal Reserve Bank of St. Louis, FRED

Source: Federal Reserve Bank of St. Louis, FRED

In a recent SBE Council analysis (“The Entrepreneurship Puzzle: Are Business Applications Converting to Actual Launches?”), I recently put business applications data in the context or alongside of other measures of U.S. entrepreneurship. The conclusion continues to hold:

“There’s very real reasons for being pleased and hopeful given the applications and births data, while the self-employment numbers lend some caution, or even concern, to the tale. Obviously, the hope is that those increases in applications and establishments will lead to increased fulltime entrepreneurship.”

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest books on the economy are The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist and The Weekly Economist II: 52 More Quick Reads to Help You Think Like an Economist.