The Census Bureau has finally released the nonemployer data for 2010 and this year’s update of the nation’s nonemployer population was accompanied by about as much drama as you’ll ever get with data wonks.
Nonemployer businesses, to jog your memory, are defined as firms with no paid employees other than the business owner or owners. Population gyrations in the nonemployer universe are worth watching because these tiny firms often serve as economic “canaries in the coal mine.”
In addition, some economists view the surge in nonemployer numbers that has occurred since the turn of the century as an intriguing labor market trend.
The nonemployer update release date was originally slated for July but the Bureau discovered a problem with the 2009 data that had to be corrected, necessitating a re-release of the 2009 data and pushing back the 2010 release.
What Was The Problem?
Apparently, the folks who were supplying the data for these calculations underreported the numbers by a pretty significant amount, particularly in the real estate and mining sectors.
I’m just going to plow through this. Try not to let your eyes cross.
The resulting corrections show, in terms of the big picture, that nonemployer numbers actually grew (instead of declining) from 2008 to 2009. There were 21.7 million nonemployers in 2009 – 382,504 more than there were in 2008 rather than 222,563 fewer. That translates into an increase of 1.8% rather than a decline of 1%.
Receipts were still down in 2009 but not by anywhere near as much as originally reported. Overall nonemployer receipts in 2009 fell by 0.8% to $923 billion instead of falling by the far more drastic 9.9% to $838 billion.
Similarly, average annual receipts dropped from $43,646 in 2008 to $42,544 in 2009, meaning that the average nonemployer business took a 2.5% cut in earnings. Not the sort of thing to make any business owner happen but much better than the 9% hit calculated from the original data.
If You’re Keeping Track
This means a few changes to the overall business population numbers for 2009, too. Total U.S. firms in 2009 numbered 27.2 million, and nonemployers accounted for 79.6% of them, rather than 26.9 million firms with 78.5% of them being nonemployers. Microbusinesses with fewer than 5 employees made up 92.7% of all U.S. firms and non-micro small businesses (5 to 499 employees) comprised 8% of the business population.
Having corrected the 2009 numbers, Census and its data providers took good care to make sure that something similar didn’t happen with the 2010 data.
The nonemployer population experienced another increase in 2010, up by 1.9% to 22.1 million strong. Total receipts for the nation’s nonemployer businesses that year grew to $951 billion, up an encouraging 3%, while the average nonemployer business owner got a $459 raise (a 1% increase) from $42,544 to $43,003 in average annual receipts.
Unfortunately, it wasn’t all good news. Nonemployer numbers declined in utilities, construction, retail, finance and real estate. Construction, utilities and finance also saw earnings declines for the year.
For All Other Sectors, The News Was Better
The five largest increases in population occurred in other services (6.6%), accommodation and food services (4.7%), mining (4.3%), administrative, support, waste management and remedial services (3.9%), while health care and social assistance tied with forestry, fishing & hunting and agricultural support services for fifth place (3.5%).
The forestry/ag sector and the mining sector also saw pretty spectular spikes in earnings between 2009 and 2010, with 12% and 13% increases in overall receipts, respectively. Receipts in transportation and warehousing also experienced a double-digit increase, at 11.5%.
The 80/20 rule still applies to microbusinesses. About eight out of ten of them earn less than $50,000 in average annual receipts, while the remaining 20% make more than $50,000. Among the lower earning firms, almost 25% make less than $5,000 annually and are probably scorned as hobbyists by many economists and policy makers.
At the other end of the spectrum, almost 1% of nonemployers earn an average of half a million per year or more and, among them, one in ten earns in excess of $1 million per year.
The Bottom Line
Nonemployer firms were recovering in advance of the rest of the economy in 2009 and 2010. While employer firms were still declining in number, those sturdy nonemployers were fighting their way back.
In fact, it is quite possible that some of the increase in nonemployer population in 2009 was a result of smaller employer firms dropping back to nonemployer status as tough times forced them to let their employees go in order to stay afloat.
It will be interesting to see whether the rest of the 2010 firm size class data reflects a recovering economy and, further, whether economic reverses in 2011 and 2012 will cause these data to grow unusually volatile over the next few years.
Census Photo via Shutterstock
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More in: Small Business Statistics
In the knowledge economy I would expect a continuing increase as more and more people start their personal businesses to supplement standard jobs. Good to hear some positive news as well! Thanks Dawn.