We have a good idea about the number of new businesses being created because an essential part of that process is to apply for an EIN (Employer Identification Number) for tax purposes. The Census Bureau uses this information to publish weekly data on business applications. The FRED Blog used this data pre-pandemic to map new businesses by state.
The FRED graph above shows business applications over the past 15 years, and two aspects of the data are striking:
- The regularity of seasonal variations through each year is impressive. In fact, one could confuse the graph with a cardiogram of a steady heartbeat.
- Business formation becomes febrile after the pandemic-related recession. This erratic behavior is natural as an economy recovers, shedding weak businesses during the recession and regaining new ones in the recovery.
This second phenomenon may be stronger than usual this time around, as it appears that there’s some reorganization happening in the labor market. But the data are too recent to allow us to compare magnitudes across recessions at this point.
How this graph was created: Search FRED for “Business applications,” click on the link, and you’re in business.
Suggested by Christian Zimmermann.