Federal Reserve Bank of St. Louis

01/23/2023 | Press release | Distributed by Public on 01/23/2023 10:08

Different patterns in the recovery of the self-employed

The COVID-19 pandemic prompted workers to reconsider their professional lives and consider different types of employment. Self-employment, which is a vital source of jobs in the US, followed a different pattern of recovery than total employment during and after the COVID-19 pandemic.

The self-employed make up between 10% and 11% of the 157 million employed workers in the United States. The Bureau of Labor Statistics (BLS) defines the self-employed as those working for profit or fees in their own business and distinguishes between incorporated and unincorporated self-employment. The incorporated self-employed, as you might expect, legally incorporated their businesses, gaining tax incentives and personal asset protection. The BLS typically excludes them from analysis of self-employment because they're considered employees of their own corporations.

The FRED graph above shows self-employment levels for both the incorporated (blue) and unincorporated (red), as well as total employment (green). The series are indexed to 100 in February 2020, right before the COVID-19 pandemic.

The incorporated and unincorporated self-employed have taken different paths over the past three years. The level of unincorporated self-employment has closely followed that of total employment and declined drastically in March and April 2020. But the level of incorporated self-employment changed little throughout this period. Unincorporated self-employment steadily recovered to pre-pandemic levels from April 2020 to July 2021, but incorporated self-employment declined more gradually to its trough in February 2021 before it began to recover.

There could be a few reasons why these groups look so different. The incorporated may have accepted PPP loans at a higher rate than the unincorporated if they were more attuned and accustomed to navigating government rules and regulations. Their businesses also tend to be more developed, potentially with more capital to keep themselves afloat. Their dip may have come later in the pandemic, after the relief dried up and the end-of-2020 COVID wave arrived.

Now, as both forms of self-employment rise above pre-pandemic levels, it's unclear whether the trends in incorporated and unincorporated self-employment will once again diverge.

How this graph was created: Search FRED for "Employment Level Total Wage and Salary, Incorporated Self Employed." Next, click the "Edit Graph" button and use the "Add Line" tab to add "Employment Level All Industries Self-Employed, Unincorporated." Then, select "Add Line" once more and search for "Employment Level." Click "Edit Line 1" and change "Units" to "Index: Scale value to 100 for chosen date." Next, select "2020-02-01 Start" to the right of "U.S. Recession" as the date to equal 100 for your custom index and "Copy to all." Finally, adjust the date range to begin at "2020-01-01."

Suggested by Victoria Gregory and Elisabeth Harding.