Are there extra small companies now in comparison with earlier than the pandemic?

President Joe Biden: “The variety of small companies is up 30% in comparison with earlier than the pandemic.”

PolitiFact’s ruling: False

Here is why: Throughout remarks designed to report his administration’s progress on unclogging the nation’s provide chains, President Joe Biden touted one other constructive financial indicator on his watch: progress in small companies.

“We’re the one main economic system on the planet the place family earnings and the economic system as a complete are stronger than they had been earlier than the pandemic,” Biden stated on Dec. 1 from the White Home complicated. “You recognize, there are different indicators of energy, too. The variety of small companies is up 30% in comparison with earlier than the pandemic.”

We had been shocked to listen to that statistic about small companies, given {that a} pandemic-induced recession clobbered eating places and different small firms.

So we dug into it, and located that Biden had misstated an actual statistic.

The White Home referred us to Census Bureau information that tracks what number of People are making use of for employer identification numbers, a step within the means of beginning a brand new payroll. Economists usually use this as a proxy for small enterprise creation.

In the newest month for which information is on the market, October 2021, the info reveals that 52,277 functions had been made. Two years earlier, in October 2019, there have been 39,105 functions. That’s simply over a one-third improve, which roughly tracks with the quantity Biden cited.

Small companies creation is working increased now than earlier than the pandemic

Nevertheless, this information doesn’t help his assertion that “the variety of small companies is up 30% in comparison with earlier than the pandemic.”

That’s as a result of the info in query measures the variety of new small companies being created, not the rise within the complete variety of small companies there are within the nation. Notably, it doesn’t account for the variety of companies which have failed. (The most recent accessible authorities information on the whole variety of companies is a few years previous.)

“The president ought to have stated one thing like, ‘The variety of new small companies created in latest months is up 30% in comparison with the months instantly earlier than the pandemic,’” stated Gary Burtless, an economist on the Brookings Establishment.

After we shared this suggestions with the White Home, they pointed to a speech the earlier week the place Biden stated the speaking level accurately.

Economists stated that Biden’s poor phrasing in his Dec. 1 remarks successfully stepped on a constructive message for the administration: Small enterprise creation has certainly been sturdy not too long ago.

“The restoration from the pandemic has been related to a surge” in new small companies, stated John Haltiwanger, a College of Maryland economist. That features entities that count on to rent employees, which is the statistic the White Home was utilizing, and people who count on to stay one-person operations.

Nonetheless, we don’t know the way sturdy this small enterprise progress is on internet with out understanding what number of small companies shuttered in the course of the pandemic.

Our ruling

Biden stated, “The variety of small companies is up 30% in comparison with earlier than the pandemic.”

Biden was citing an actual statistic, however he described it incorrectly. In actuality, there was a 30% rise in contrast with late 2019 in a sure kind of tax-related functions which are extensively used as a proxy for small enterprise formation. This statistic reveals that the variety of newly created small companies is up 30%, not the whole variety of small companies.

We price the assertion False.

Sources

  • White Home, remarks by President Joe Biden on the nation’s provide chains, Dec. 1, 2021

  • White Home, remarks by President Joe Biden asserting his nominees for chair and vice chair of the Board of Governors of the Federal Reserve System, Nov. 22, 2021

  • Federal Reserve Financial institution of St. Louis, “Enterprise Functions with Deliberate Wages: Whole for All NAICS in the USA,” accessed Dec. 2, 2021

  • Electronic mail interview with Gary Burtless, senior fellow on the Brookings Establishment, Dec. 2, 2021

  • Electronic mail interview with John Haltiwanger, economist on the College of Maryland, Dec. 2, 2021

This text initially appeared on Austin American-Statesman: Are there extra small companies now in comparison with earlier than the pandemic?

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