Pic-of-the-Week: One Bright Spot for Self-Employment (08/18/2014)

SELF-EMPLOYMENT REMAINS WEAK – EXCEPT FOR THOSE INCORPORATED.  A common refrain in this recovery is that self-employment is lagging badly.  That is generally true if you look at the traditional measure of self-employment which covers unincorporated businesses (primarily sole proprietors) only. The top graph shows that the level of traditional unincorporated self-employment has been locked in a downtrend during much of the period since 2007. Currently about 9 million persons are self-employed in unincorporated businesses. Of these, less than 1 million are farm proprietors. The number of self-employed farm operators continues to fall steadily but is not the source of weak overall self-employment. Instead it is self-employment in the traditional non-farm sectors, which is off by nearly 2 million from the recent peak.

The Census Bureau also tracks another self-employment series that covers roughly 5 million workers who are self-employed but have chosen to incorporate their business operation. These workers have traditionally been treated as wage & salary employees in the major employment surveys. The bottom graph shows the available data for this series from 2000 to the present. It follows a much different cycle than the unincorporated series and has been in a slow, steady uptrend since early 2010, much like wage & salary employment. This is the one bright spot for self-employment in the U.S. When including those who are incorporated, total self-employment has been tracking sideways since 2012 rather than falling steadily. Not ideal, but not quite as bleak either.