After Record New Startups, U.S. Census Makes It Official Data
After Record New Startups, U.S. Census Makes It Official Data
(Bloomberg) -- The Covid-19 crisis spurred a record number of startups in the U.S., as Americans rushed to create their own firms after being laid off or quitting their jobs in numbers never seen before.
Adapting to the seismic changes in the labor market, the U.S. Census Bureau said it will make business formations an official statistic from the government, starting Dec. 8.
Startups have been central to job creation in the country, and the move will help keep a pulse on entrepreneurship as the economy recovers from the Covid shock.
Whether the pandemic-era uptick will persist is an open question, said John Haltiwanger, professor of economics at the University of Maryland and a senior research fellow at the Census Bureau. The data completes the partial picture offered by measures like the monthly jobs report, he said.
“It’s quite striking that the first half of 2021 has seen not only a surge in applications for new businesses, but a surge in quits,” Haltiwanger said. “At least some of the people who are quitting aren’t just taking another job at another firm, they’re actually starting up their own firm.”
The Census Bureau started to publish Business Formation Statistics, or BFS, as experimental data in February 2018. The official data will be monthly and include regional and state levels. In the future, the data may be broken down by race, ethnicity and other demographic categories, according to Ron Jarmin, acting director of the Census Bureau.
Developed with assistance from the Federal Reserve, the data help researchers that have long struggled to get high-quality information about new businesses in a timely fashion.
“BFS proved especially useful during Covid-19 in monitoring the weekly progress of business applications,” Jarmin said. “It allowed policymakers, analysts, and researchers to better monitor the state of entrepreneurial activity in the U.S.”
Following are further comments from Jarmin. The interview was edited for clarity and length.
Why is it important at this time?
Earlier BFS research suggests business application dynamics are correlated with shifts in economic activity, as evidenced by the Great Recession. For this reason, we’re confident BFS data will continue to be important and relevant. For 2020 over 2019, the number of business applications was up 24.2%. With this recent surge in applications, it will be interesting to see the effect on new businesses and employment based on the increase in applications.
Was the rise of remote work and freelancers an influence in elevating the report’s status?
High-propensity business applications have a significant likelihood of turning into a business with payroll. If you were to subtract the number of high-propensity business applications from regular business applications, you would be left with non-high-propensity business applications. Non-high-propensity business applications aren’t published on their own but can be thought of as applications that have a high likelihood of turning into a business without payroll or never forming. External researchers consider non-high-propensity business applications as applications for likely non-employers, which can provide information about self-employment activity, which is gaining importance in economic activity.
What were some of the most interesting findings in the data during the pandemic?
If you were to graph total business applications over time, the number of applications received in July 2020 was the highest of the entire time series, and the data has remained around that level. If you were to look at the two-digit NAICS data (Ed.: NAICS is a classification by activity sector) of the time series, you would see that that spike is primarily due to retail trade business applications. Further, if you looked at our Special Projects data, you’d find that the increase in retail comes from primarily online activity, which includes things like electronic shopping, home-delivery sales, etc. BFS can point to trends within certain sectors of the economy. During the pandemic, BFS captured the shift to increased online activity.
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