Business Estimates from the Office of Advocacy: A Discussion of Methodology

The Office of Advocacy creates estimates of the number of employer and nonemployer businesses for recent years, since the newest available data have around a two-year lag. Advocacy estimates the number of nonemployers using growth rates from Internal Revenue Service’s sole proprietor count estimates. Advocacy estimates the number of employers using the net difference in employer births and deaths from the Employment and Training Administration. Analysis shows that historical estimates have been close to the actual figures, as employers and nonemployers exhibited slow steady growth during the period of analysis. Nonemployers, however, tended to be slightly underestimated as sole proprietors have consistently grown faster than nonemployers in recent years. As more data become available, more sophisticated techniques could be employed to create current estimates of the number of businesses.