New Data on US Business Formation

The quality of official data on startups and entrepreneurs in the US is generally quite poor, especially when compared to what is captured in other developed economies.  Meanwhile, government funding for key programs like the decennial Census is declining.  But, it’s not all bad news as some new data sources are coming on line.  The latest is the US Census Bureau’s Business Formation Statistics dataset, which was just unveiled last month.  The BFS tracks when individuals apply for a new Employer Identification number, via the Internal Revenue Service’s SS-4 form.  The BFS, which tracks data at the state and county level, should give us an excellent picture that projects a location’s future entrepreneurial potential, i.e. are there lot of local folks starting new companies?

A related research paper assessing the BFS results offers some tantalizing ideas on how this data can be used.   It finds that regions with shale gas activity showed much higher EIN application numbers.  Similarly, and not surprisingly, EIN applications were also higher in places that have recovered most quickly from the Great Recession.  Finally, a related National Bureau of Economic Research paper finds that the number of new EIN applicants with potential to create new jobs still falls below levels found before 2008.