Measuring Early-Stage Business Formation Accessible Data

Figure 1: Number of EIN Applications

This is a line chart showing the counts of both seasonally adjusted and not seasonally adjusted EIN applications. The x-axis measures time and ranges from 2005:Q1 to 2017:Q3. The y-axis shows the number of applications and ranges from 500,000 to 1,000,000. The data show a clear seasonal pattern with the first quarter being an annual peak with each subsequent quarter falling. There is typically a slight drop-off between the first and second quarters and a steeper drop between the second and third. The annual movements are clearer in the seasonally adjusted data where EIN applications are rising from about 600,000 in 2005:Q1 up to about 680,000 in mid-2007, and then they fall down to about 600,000 at the end of 2008 and rise fairly steadily afterwards up to about 800,000 by the third quarter of 2017.

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Figure 2: Applications and New Business Formations

This is a line chart with four lines. The x-axis measures the date and ranges from 2005 to 2017. The y-axis measures the value of the various lines as an index where 2005=100; the y-axis ranges from 50 to 125. The lines shown are for applications labeled by Business Applications, Business Applications with Planned Wages, High Propensity Business Applications, and Firm Births from the BDS.  Because the chart begins in 2005, all the lines start with a value of 100. The line for Business Applications edges up until about 2007 and then falling back below 100 in 2009 before rising again, quite steadily and reaching nearly 125 by the third quarter of 2017. The line for High Propensity Applications remains above its 2005 level until 2007 and then it falls until 2009 and only edges up very modestly to reach about 80 in 2017:Q3. The line for Business Applications with Planned Wages also falls sharply during the Great Recession, but it does not show any recovery, declining slowly between 2010 and 2014, and flattening out at about 55 from 2014 forward. The line for Firm Births from the BDS falls in the Great Recession, to about 73 in 2010, and it shows little recovery up through its last point in 2015.

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Figure 3: Actual and Projected Business Formations within 4 quarters of EIN Application

There are two panels in Figure 3. Both panels are line charts with two lines--one for actual business formations and one for projected business formations. Both panels have an x-axis that measures time and a y-axis that measures the number of EIN applications. The panel on the left covers the period 2005 through 2017, and the panel on the right covers the period 2011 through 2017. For the panel on the left, the y-axis ranges from 60,000 to 140,000. Actual business formations are at about 120,000 in 2005:Q1 and fall sharply during the Great Recession. They bottom out in about 2012 and seem to show only a very modest rise through their last value at the end of 2014. Projected business formations begin in 2009 and end in 2017:Q3. For the period that they overlap with actual formations, they track very closely. For the period from 2015 forward, they appear to move up slightly.

The right hand panel of Figure 3 shows a shorter date range and the y-axis ranges from 66 to 80. With this zoomed-in view, one can see that the projected formations actually show a rise for the period from 2015 forward, a view which is hard to see in the left hand side panel because of the scaling.

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Figure 4: Business Formations per High Propensity Business Application (seasonally adjusted)

This is a line chart with six lines. The x-axis measures time and ranges from 2005 to 2017, and the y-axis is the rate of business formations per high propensity business application and ranges from 0.10 to 0.55. There are lines for five selected states--North Dakota, Missouri, California, Illinois, and Florida. There is also a line for the U.S. as a whole. The line for the U.S. starts at about 0.34 in 2005 and generally falls through 2008 to about 0.25 in 2009 and is little changed since then. Each state's line falls during the recession, and only Missouri's seems to show any post-recession improvement. The line for North Dakota has the highest rate of formation throughout the period and it is the most volatile. It peaks at about 0.53 in early 2005 before moving down to about 0.40 until 2011, when it ticks up for a couple quarters before falling and remaining around 0.40 for several quarters. The line for Missouri starts at around 0.40 and ends the period at around 0.35. The line for Illinois most closely resembles the line for the U.S. and it starts at about 0.28 and ends at about 0.23. The line for Florida is the lowest on the chart, starting at about 0.20 and ending at about 0.16.

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Last Update: March 07, 2018