The Daily Escape:
Sunset paints a Truro barn and marsh – October 2021 iPhone photo by Wrongo
Following on Wrongo’s article about the missing people who economists say should be looking for jobs in what is otherwise a vibrant economy, comes the news that there is a huge and sustained explosion of new businesses being launched in America.
This means that many individuals are striking out on their own. From Wolf Street:
“New business formations, based on applications for an Employer Identification Number (EIN) with the IRS, exploded in June and July last year…then this year exploded again and remained far above the historical range.”
In September 2021, 431,381 EIN applications were filed with the IRS, 49% above September 2019, according to data released by the Census Bureau. For the first nine months of the year, EIN applications were up by 58% from the same period in 2019. Here’s a chart:
These are monthly totals! We seem to be forming a ton of start-up companies since 2020, way above the historical trend. These new businesses surely must reduce the total number of people looking for work as reported by the Department of Labor.
More from Wolf Street: (parenthesis and brackets by Wrongo)
“…the historic high level of new business formations every month is part of the bizarre puzzle that this economy has become: The strange phenomenon of labor shortages, the enormous stimulus payments that went out, the federal unemployment payments that are now ending, the $800 billion in forgivable PPP loans (Paycheck Protection Program loans) that went [out] earlier this year, the 3.2 million people who still haven’t returned to the labor force…”
Some commentators felt that last year, EIN applications were spiking because fraudsters were creating businesses to try to get their hands on those forgivable PPP loans. But a quick check would have shown that an EIN wasn’t required for PPP loans. Further, businesses had to have been “in business” for some time to qualify. And while the PPP ended in May, business applications have continued to be strong every month since then.
Most new businesses create at least one job for the owner and maybe a few for other people, but most never become large employers. Even though many new businesses eventually fail, the number of new business formations seems to be large enough to explain the puzzling numbers on job participation rates, unemployment and job quits that we’ve been seeing since the pandemic started.
That’s something to think about.
It’s Saturday, and time to kick back and forget about whether Steve Bannon will ever see justice. It’s time to spend a few moments contemplating Wrongo’s Saturday Soother.
Here at our temporary (and rented) global headquarters for the Mansion of Wrong in Truro on Cape Cod, we’ve had a busy week. Several family members live on the Cape, and we’ve had family from off-Cape come and stay for a few nights, so it’s been a busy and rewarding time with family.
But even Wrongo needs some downtime, so let’s all settle back and grab a comfy chair by a big window. Now, listen to Fauré’s “Cantique de Jean Racine” performed with a large choir that is conducted by Sofi Jeannin, and recorded in October 2016, at the Auditorium of Radio France.
This composition based on Jean Racine’s poem, won Fauré a prize before he was twenty. If you watch the video, the choir is a perfect mix of adult and young voices.
