PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

The Latest Business Applications Data: Trends and Levels

By at 13 June, 2024, 11:02 am

by Raymond J. Keating  –

The latest data from the U.S. Census Bureau on new business applications actually present a conundrum. If one focuses on the recent trend, there’s reason for concern. But if one focuses on the levels, there are real reasons for hope and to be encouraged.

First, Census reported that new business applications – i.e., “applications for tax IDs as indicated by applications for an Employer Identification Number (EIN) through filings of the IRS Form SS-4” – for May 2024 had declined by 1.5 percent compared to April.

Also, high-propensity business applications – i.e., those applications most likely to become businesses with payroll – declined by 0.8 percent.

Total new business applications have been declining since September of last year. And the same goes for high-propensity applications.

Source: Federal Reserve Bank of St. Louis, FRED

Source: Federal Reserve Bank of St. Louis, FRED

While these trends are noted in the above charts, so is the key second point from the business applications data, namely, that their levels remain far above pre-pandemic levels.

For example, in February 2020, new high-propensity business applications came in at 111,847, while the May 2024, even with the recent downward trend, stood well above that level at 138,410. And as for total business applications, the February 2020 level of 302,107 was far short of the May 2024 level of 423,945.

Indeed, post-pandemic, new business applications have persisted at levels far above their pre-pandemic levels, in a dataset going back to mid-2004.

The U.S. economy desperately needs an entrepreneurial revitalization, and part of our hopes are tied to continued high levels of interest in business ownership, and new business applications actually becoming businesses.

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, The Weekly Economist II: 52 More Quick Reads to Help You Think Like an Economist and The Weekly Economist III: Another 52 Quick Reads to Help You Think Like an Economist.

 

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