Experts say the Labor Department’s household survey, from which it determines the unemployment rate, would include people working on all kinds of job sites — including those in Pierzchala’s category. But the establishment survey, which the government uses to determine which job categories are gaining and losing, would include employers at established firms and agencies and not self-employed people who may work from home.
“I am a statistician and worked in government. I’m aware of these two surveys,” said Pierzchala, who operates MMP Survey Services LLC, which provides technical assistance to companies that conduct complex government surveys. “It makes perfect sense the establishment survey would not pick up micro businesses like this.”
National studies indicate that the ranks of the self-employed have increased during the economic downturn, suggesting that high unemployment rates have prompted many people to start off on their own. The number of firms that launched with one person rose to 340 per 100,000 per month in 2010, compared with 300 per 100,000 per month in 2007, according to a study released in March by the Kauffman Foundation.
“With high unemployment rates, people are wanting some alternative to the labor market,” said Robert W. Fairlie, an economics professor at the University of California at Santa Cruz and the author of the study.
Sally Sternbach, executive director of Rockville Economic Development Inc., said demand has grown significantly from people interested in getting basic information about starting a business.
“We used to run eight to 10 people in a seminar,” Sternbach said, adding that doctors, lawyers, scientists, IT specialists and public relations specialists have established sole proprietorships.
But since the downturn, she added, “we’ve been averaging 35 to 40 people at the seminars. We get a lot of calls for technical assistance — how to get a tax ID number, ‘With whom do I register a new business?’ and ‘Should I register as an LLC or corporation?”
The number of firms starting with more than one employee dropped, according to the study.
People who work for themselves without employees are “not making huge capital investments, so they have what we call easy-in, easy-out conditions,” said Brian Headd, an economist at the U.S. Small Business Administration’s Office of Advocacy. “It helps keep your skills from getting rusty . . . if you’re trying to get back into the workforce.”
The Labor Department does “birth and death” modeling of the employment data to try to estimate the number of companies that are starting up and closing, said Headd. It’s easier for the government to determine the firms that close — they can figure that out when they call and discover the number is disconnected. But it’s not so easy to capture new firms.
“Obviously, it’s imperfect and it struggles when the economy has inflection points,” such as during downturns, he said.
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