U.S. Economic and Policy Outlook for 2024

By at 17 January, 2024, 2:19 pm

by Raymond J. Keating –

The resiliency of America’s private sector has been on full display over the past four years, with entrepreneurs, businesses, investors and workers leading our country and economy through a pandemic and its related government shutdowns, a brutal recession, and the battle back.

Perhaps the most amazing aspect of this has been evidence that the fires of entrepreneurship still burn bright in the U.S. despite many challenges and obstacles.

This is clear in the recent trend in new business application. So, let’s update and expand upon an SBE Council look at entrepreneurship numbers from a few months ago.

Business Creation and Starts are Higher

Average monthly business applications never hit 250,000 in a year from 2005 (start of the U.S. Census Bureau’s dataset) to 2016. In 2017 and 2018, the monthly average moved up to just over 290,000. And then in 2020, with the onset of the pandemic, the monthly average actually jumped to 365,230, and then subsequently have topped 400,000, coming in at approximately 449,000 in 2021, 421,000 in 2022, and 454,000 in 2023 (latest report here). Of course, the question is how many of these applications actually turn into businesses.

The Census Bureau’s employer and nonemployer data suffer considerable lags. In terms of employer firms, there were 6,102,412 in 2019, and that moved to 6,140,612 in 2020, and to 6,294,604 in 2021. So, we did see growth in the number of employer firms during the pandemic, which is amazing.

As for nonemployer businesses (i.e., one-person businesses), in 2019, they registered 27,104,006, and then came in at 27,151,987 in 2020. The 2021 data are not yet available, but, again, we saw growth from 2019 to 2020.

In addition, the Bureau of Labor Statistics publishes a “Business Employment Dynamics” report, with the latest covering the first quarter of 2023. That report includes quarterly births of new establishments. It should be noted that establishments include different locations for the same business. At the same time, though, new establishments will capture new firms as well, including one-person businesses. Unfortunately, there’s no real way to pull this apart, that is, until the Census’s new firms data catches up. Even with limitations, there obviously is value in this BLS data.

In the first quarter 2023 (latest data), establishment births (seasonally adjusted) registered 331,000. That followed on 344,000 in the fourth quarter 2022, 349,000 in the third quarter, 365,000 in the second quarter, and 349,000 in the first quarter. In 2021, the numbers again were above 300,000 in each quarter (308,000 in the first quarter, 351,000 in the second quarter, 359,000 in the third quarter, and 378,000 in the fourth quarter).

The latest two years with complete data – that is, 2021 and 2022 – are the only years in which the quarterly levels ever topped 300,000. And this dataset goes back to 1993.

Interestingly, the latter half of the pandemic year of 2020 saw high levels of establishment births as well. The first quarter 2020 came in at 278,000, which at that point was a quarterly high for the data. The second quarter, which captured the fuller impact of the pandemic, saw births drop to 228,000 (deaths jumped to all-time high of 327,000 as well – more on deaths shortly). But third quarter births jumped back to 277,000 and then to 287,000 in the fourth quarter.

As a comparison, looking at pre-2020 quarterly numbers from 2015 to 2019, for example, establishment births ranged between 233,000 to 269,000. So, we definitely see a link between the jump up in new business applications and an increase in establishment births.

By the way, establishment deaths also have risen, particularly from the second quarter of 2021 (22,000) through the second quarter of 2022 (322,000), which is the latest period with deaths data. The pickup in deaths is expected with the rise in births, as entrepreneurship is an endeavor rich with risk and uncertainty, and failure is not unusual. The key is to see robust births, with deaths lagging well behind births, as has been the case post-pandemic.

Again, the spirit of enterprise lives on among Americans. Indeed, entrepreneurship stands out as one of America’s clear competitive advantages.

So, what should current and emerging entrepreneurs, businesses in general, investors and workers be looking at in 2024 in terms of economic and related trends that will impact their businesses to varying degrees?

Unfortunately, entrepreneurs will, once more, lean heavily on their persistence, resiliency and courage as 2024 seems destined to be jam-packed with questions and uncertainties. For example, there either are no easy answers to the following issues and questions, or the answers might not exactly be productive.

The Inflation Factor

Will inflation prove sticky or will it be brought further under control? And tied to that question is:

Does the Fed have a clue as to what it’s doing in terms of manipulating interest rates, and will it get serious in removing a key source of uncertainty, which has been the unprecedented explosion in the monetary base (currency in circulation plus bank reserves) since 2008?

It seems to me that inflation has come down thanks to the private sector healing, innovating and expanding supply chains, rather than much that the Fed has done. Looking ahead, let’s hope that the Fed limits its missteps, while the private sector continues to works it magic.

Economic Growth

At best, the U.S. economy could return to its post-2007 track record of under-performing economic growth, or at worst, we could see a recession in 2024. Either way, does anyone in Washington, D.C., offer or show serious interest in a clear growth agenda, which would necessitate substantive and permanent tax and regulatory relief; advancing free trade; and reining in federal spending (which is projected to persist at record peacetime levels for the foreseeable futures, thereby draining resources from productive private sector undertakings)?

Population and Immigration

The U.S. faces slowing population growth and an aging population, which creates serious economic woes in terms of unmet labor needs up and down the skills ladder, and in terms of lost entrepreneurship. Technology, of course, can help, but these population/labor market challenges are undercutting growth now, with more severe costs down the road given diminished entrepreneurship and innovation. Again, is anyone on the public policy landscape taking this seriously, and offering reforms, in particular in terms of immigration, that will help – or is this merely an issue to be used as a political weapon to fuel one’s base?

U.S. Global Leadership on Trade

International trade is an essential source of growth, including in terms of expanding opportunities for entrepreneurs, businesses and workers. Will America’s policy leaders recapture economic clarity on this issue, and get back to the U.S. leading the way in reducing governmental barriers to trade, or will recent protectionist inclinations persist? Judging by the points being made by leading presidential candidates, my hopes don’t run high.

International Conflict

The world is an increasingly dangerous place, especially with the U.S. stepping back in various parts of the globe, and that’s not good news for business and the economy. Russia’s war against Ukraine, China’s economic challenges and threats against Taiwan, and Israel’s response to terrorist attacks and the Middle East in general make for a concerning list that could create additional humanitarian tragedies and economic problems in the coming year and beyond. Freedom and peace are good for people and for commerce, and the U.S. needs to clarify and strengthen its voice and role in the world to advance freedom and peace.

These are serious issues and questions. Unfortunately, and perhaps ironically, sober assessment and productive responses are likely to be in short supply given that 2024 is both a presidential and congressional election year.

Private Sector Innovation Continues to Respond

However, among the positives that will help in some of these areas is private sector investment and innovation on the technology front, including advancements in telecommunications, computer speed and power, AI, the metaverse, and more.

In turn, that will expand opportunities for entrepreneurs to gain access to capital and new markets and consumers, to improve operations and customer service, to create new goods and services, to start up and expand businesses, to create new job opportunities for workers, and to improve our quality of life. But even innovation is threatened by misguided government policies, such as antitrust policy that ignores market realities and focuses on attacking U.S. global technology leaders.

Indeed, the free enterprise system should make us all optimistic about the coming year and far beyond. We just need for policymakers to stop erecting obstacles and increasing the costs of working, entrepreneurship and investing, and instead provide a sound foundation for growth.

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.


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