After a single year of tepid growth in 2006, the population of U.S. firms without paid employees other than the business owner(s) came roaring back in 2007 with almost a million new firms, according to data released by the Census Bureau last week. Overall, nonemployer firms increased in number by almost 940,000, or 4.5% in 2007. Total receipts still have not cracked $1 trillion but they have edged closer, clocking in at $992 billion. That is a 2.2% increase over the $971 billion in receipts earned by nonemployers in 2006. That said, average annual revenues for nonemployer firms were down by 2.2% on a year-over-year basis, falling from $46,724 to $45,688. The discrepancy between the gains in nonemployer population and losses in receipts is fairly widespread, impacting half of industry sectors at the two-digit NAICS code level.

This new spike in nonemployer numbers was almost as unexpected as last year’s slowdown. The common belief was that the nonemployer population would stabilize at 2-3% for a year or two, and that we would not see a recessionary spike in nonemployer numbers until the 2009 data was released in a couple of years. And that may still turn out to be true. It may be that the 2007 numbers are the precursor to a real spike of between 6% and 10%, that may show up in the 2008 or 2009 nonemployer data. On the other hand, it also pays to remember that small firms had been shedding jobs for quite some time before job losses began showing up in the government’s monthly employment data. In fact, what we have seen among nonemployers in 2007 may have been brought about by the small firm layoffs and closures that took place in 2006. By the time the dust settles (sometime in 2010, I suspect), it will be interesting to see how many nonemployer firms there are in the country and what percentage of all U.S. firms they will comprise. We’ll be able to get started on that when the SBA Office of Advocacy updates its firm size data early next year.