How Many Employed People Are Making No Money or Barely Any Money?

Jobs vs Employment

Today the BLS reported an astonishing jump in employment by 1.136 million compared to a mere 210,000 rise in jobs.

The employment numbers come from a household phone survey. The jobs report comes from payrolls. 

I was wondering how much of the employment jump was self-employment. Apparently none, at least judging from my chart.

Possible Explanations 

• Some of the discrepancy might be seasonal-adjustment noise related to holiday hiring.
• Perhaps it’s an outlier that will be revised or averaged away. 
• Perhaps there is a bit of fraud in which people claimed to be unemployed to collect insurance and also lied on the household survey to be consistent.
• Perhaps we will see a jump in self-employment that catches up later. 
• Perhaps the payroll survey catches up later.  

Whatever the reason, the bond market scoffed at the jump in employment and the associated huge decline in the unemployment rate. 

Treasury yields are down again today. I will report on bonds after the market close.

Employment Definition

In the household survey, if you work as little as 1 hour a week, even selling trinkets on eBay, you are considered employed.

Regardless of the reason for the surge in employment, are the newly self-employed making any money? 

Unincorporated Self-Employment Levels 

• In February of 2020, there were 9.38 million unincorporated self-employed.
• At the April 2020 bottom there were 8.21 million unincorporated self-employed.
• As of November of 2021 there are 10.00 million unincorporated self-employed.
• From April 2020 to now, that’s an increase of 1.79 million unincorporated self-employed.

Incorporated Self-Employment Levels

• In February of 2020, there were 6.47 million incorporated self-employed.
• At the April 2020 bottom there were 6.41 million incorporated self-employed.
• As of November of 2021 there are 6.36 million incorporated self-employed.
• From April 2020 to now, that’s a decrease of about 50,000 incorporated self-employed.

Self-Employment Trend Analysis 

• Those who incorporate are likely making a serious effort at their business. 
• Those who don’t incorporate are far more likely to be trying something haphazardly, part-time, or just as a way to make a little spare cash (no matter how much time they spend). 
• 1,79 million new people tried their hand at their own unincorporated business in the recovery.
• However, 50,000 incorporated businesses threw in the towel. 

What’s Going On?

1. Three rounds of fiscal stimulus that paid people more to be unemployed than employed provided an incentive to individuals to do anything other than going back to work at McDonalds, Wendy’s etc. 
2. Meanwhile, numerous open job opportunities at very competitive salaries enticed 50,000 serious business owners to throw in the towel or perhaps some retired. 

So, how many of these new self-employed entrepreneurs are making any money? 

Regardless, there is 1.79 million more of them than in April 2020. 

Small Business Trends has an interesting article on Incorporated Versus Unincorporated Self Employment. 

Unfortunately, the above link is very dated, from January 2014. 

Key Points 

• The Incorporated Self Employed Earn Much more
• The Incorporated Self Employed are More Likely to Have Health Insurance
• Incorporated Self Employed are Much More Likely to be Male
• Incorporated Self Employed are More Likely to be White and Asian
• The Incorporated Self Employed are More Likely to be in the Middle of the Age Distribution
• The Incorporated Self Employed are More Likely to be American Citizens
• The Incorporated Self Employed are More Likely to be Married
• The Incorporated Self-Employed are More Likely to be Proficient in English
• The Incorporated Self Employed are More Highly Educated
• The Incorporated and Unincorporated Self Employed Tend to Work in Different Industries and Occupations

Related Discussion

For November, the Jobs Gains Were Less Than Half the Consensus But Unemployment Rate Drops Steeply

And the unemployment rate fell by 0.4 percentage points to 4.2% compared to 4.4% pre-pandemic.

Something seems amiss. That’s what got me thinking about self-employment.

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