by Raymond J. Keating –
New business applications continued at a robust level at the start of 2022.
Specifically, as reported by the U.S. Census Bureau, total monthly applications (seasonally adjusted) for Employer Identification Numbers via the IRS grew by 2.6 percent in January 2022 versus December 2021, including 2.0 percent growth in high-propensity applications (i.e., business applications that have a higher likelihood of turning into businesses with payrolls).
Source: Federal Reserve Bank of St. Louis, FRED
Source: Federal Reserve Bank of St. Louis, FRED
Consider that the total number of new business applications came in at 430,411 in January 2022, and that compared to the February 2020 pre-pandemic level of 300,705, and the pre-pandemic high of 309,607 in December 2019.
And as for high-propensity new business applications, the January 2022 level of 140,174 compared to the pre-pandemic February 2020 level of 111,056.
As we have noted before, after the major declines suffered in March and April of 2020 with the onset of the pandemic, new business applications then took off and have persisted at levels well above those prevailing pre-pandemic, with data going back to mid-2004.
Strong economic growth moving forward will rely on a dramatic recovery in entrepreneurship, fueled by private investment. These business formation numbers provide real hope.
Policymakers should be working to provide a sound, pro-growth policy foundation upon which the conversion from business applications to actual business formation and growth can occur. That agenda should be focused on, for example, tax and regulatory relief and overall policy stability so these businesses can open and operate with certainty.
Unfortunately, the Biden administration and leaders on Congress are bent on making the entrepreneurial process more difficult and costly with higher taxes, increased regulation, and more government interference in general.
Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.