Robust Employment Growth, Just not for the Self-Employed

employment growth research

The January jobs report from the Bureau of Labor Statistics (BLS) provided good news. Non-farm employment increased by 257,000 jobs, exceeding the consensus expectation of economists. And the November-to-January numbers showed the largest three-month rise in employment in seven years.

The robust job creation numbers mean that the economy has now replaced the positions lost during the Great Recession. BLS data show that more Americans are employed now than were working in November 2007.

Job creation looks even stronger when examined during the current economic recovery alone. Employment has risen by 9.9 million when measured on a seasonally-adjusted basis (and 6.9 million on an unadjusted basis) since June 2009.

The good employment news, however, confounds what has happened to the self-employed and those employed by others. The job creation story is far worse for the self-employed than it is for the economy as a whole.

From June 2009 to January 2015, the overall self-employment rate, which measures the fraction of those employed who work for themselves, either as the head of a corporation or in an unincorporated business, declined from 10.9 percent to 10.1 percent. Because the self-employment rate measures the fraction of those employed who are working for themselves, a decline means that self-employment is not keeping up with the creation of jobs for others.

In fact, employment numbers for the two groups have moved in opposite directions during the recovery. Since June 2009, employment by others has risen by 5 percent, when measured on a seasonally-unadjusted basis. By contrast, self-employment has declined by 3.9 percent over the same period.

Employment by others has recovered from the Great Recession, but self-employment has not. While 2.7 million more people (measured on an unadjusted basis) work for others now than did so in November 2007, 783 thousand fewer people are self-employed.

The figure above shows the number of self-employed and wage employed by others as a percentage of the levels in November 2007, the month before the Great Recession began. While the wage and self-employment declined by roughly the same percentage during the Great Recession, the jobs recovery has been much stronger in wage employment than in self-employment.

The big laggard in job creation is the unincorporated self-employed. While incorporated self-employment is not up quite as much as employment by others since June 2009 (3.1 percent versus 5.0 percent), both numbers have increased. However, unincorporated self-employment has dropped by 7.6 percent since the current expansion began.

Source: Created from data from the Bureau of Labor Statistics

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Scott Shane Scott Shane is A. Malachi Mixon III, Professor of Entrepreneurial Studies at Case Western Reserve University. He is the author of nine books, including Fool's Gold: The Truth Behind Angel Investing in America ; Illusions of Entrepreneurship: and The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By.

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