ICYMI: Bidenomics Is Working—and American Consumers and Small Businesses Are Feeling It

Unemployment remains near record lows and inflation has fallen to 3%, with President Biden's investments in America serving as wind in the sails of our economy. Investments in domestic manufacturing are booming.

And the American people are beginning to feel the effects. As the Associated Press reported, "U.S. consumer confidence shot to the highest level in two years this month as inflationary pressures eased and the American economy continued to show resilience." As Dana Peterson, the Conference Board's chief economist put it: "Expectations for the next six months improved materially, reflecting greater confidence about future business conditions and job availability."

Meanwhile, the Economic Innovation Group released their latest small business report, with an unambiguous title: "The Startup Surge Continues: Business Applications on Track for Second-Largest Annual Total on Record." If their data and trends hold, we are on track to have the first, second, and third best years for new business applications on record all under President Biden.

See coverage below:

Associated Press: U.S. consumer confidence jumps to a two-year high as inflation eases
[Paul Wiseman, 7/25/23]

WASHINGTON (AP) — U.S. consumer confidence shot to the highest level in two years this month as inflationary pressures eased and the American economy continued to show resilience in the face of dramatically higher interest rates.

The Conference Board, a business research group, said its consumer confidence index rose to 117 in July from a revised 110.1 in June. The gauge beat the 110.5 that economists had expected and was the highest since July 2021.

The index measures both Americans' assessment of current economic conditions and their outlook for the next six months. Both improved in July. The future expectations index rose to 88.3 in July, clearing the recession threshold of 80 recorded in June.

Economists closely monitor Americans' spirits because consumer spending accounts for around 70% of U.S. economic activity. The Conference Board index fell more or less steadily from mid-2021 to mid-2022 as surging prices ate into household budgets.

But confidence has come back, in fits and starts, over the past year as inflation eased in the face of 10 interest-rate hikes by the Federal Reserve. Fed policymakers are expected to raise their benchmark rate again Wednesday to the highest level in 22 years.

The U.S. economy — the world's largest — has proved surprisingly resilient in the face of sharply higher borrowing costs. Employers are adding a strong 278,000 jobs a month so far this year; and at 3.6% in June, the unemployment rate is not far off a half-century low.

Tumbling inflation and sturdy hiring have raised hopes the Fed just might pull off a so-called soft landing — slowing the economy just enough to tame inflation without tipping the United States into recession.

"Expectations for the next six months improved materially, reflecting greater confidence about future business conditions and job availability,'' said Dana Peterson, the Conference Board's chief economist. "This likely reveals consumers' belief that labor market conditions will remain favorable."

Economic Innovation Group: The Startup Surge Continues: Business Applications on Track for Second-Largest Annual Total on Record
[Daniel Newman, 7/24/23]

Key Findings

• Over the first six months of 2023, applications to start a business likely to hire employees outpaced last year's first half-year amount by more than 7 percent. Assuming the current trend holds, then this year's annual total should be just shy of 2021's record amount.
• Nearly 871,000 likely employer applications have been filed so far this year—a 36 percent increase over the prepandemic half-year baseline—and the second largest midyear total on record.
• The business application surge remains broad-based across most industry sectors, with the strongest year-over-year growth in healthcare, retail, arts & entertainment, and accommodation & food services.
• The leading communities for growth in new business formation are overwhelmingly in the South, a region home to seven of the top ten states for total business application growth since 2019.

Early-stage business activity across the United States remains robust through the first half of 2023, as the pace of new business formation actually strengthened over last year. Individuals filed nearly 2.7 million applications to start a business between January and June of this year, a 5 percent increase over 2022 and a staggering 52 percent increase over the same period in 2019. One-third of those filings were for new businesses likely to hire employees—a key subset of applications from the Census Bureau's Business Formation Statistics demonstrating a "high propensity" to hire staff, if and when the business becomes operational. The volume of likely employer applications also remained well above prepandemic levels, surpassing the total from the first six months of 2019 by 36 percent. Startups and young companies—particularly those likely to hire employees—play an outsized role in job creation and wage growth.

The pandemic jump-started a promising period of strong business formation across the United States, and the increased activity shows no sign of abating three years on. Business applications serve as a timely and forward-looking indicator of economic activity and growth. However, it typically takes several months for an application for a new Employer Identification Number (or EIN, the underlying variable tracked in the data) to actually turn into a new business, and only a fraction of applications typically complete the journey. For instance, Census projects that about 9 percent of all applications filed in June 2023 will eventually become operational within the next two years.

Here we highlight several major takeaways for business formation through the first half of 2023. We focus on applications from likely employers because of their crucial role in job creation. We make most comparisons to 2019 in order to explicitly highlight how the pandemic-era economy has dramatically differed from prior trends up to 2020 when the pandemic hit, and to emphasize the staying power of the startup surge.

Business formation took a hit following the Great Recession and never fully bounced back—until the pandemic led to a gravity-defying jump that has entered its third year. In the first half of 2023, individuals filed nearly 871,000 applications to form businesses likely to hire employees, the second largest level on record. The surge has stood firm against both inflation and recession fears—and even a banking crisis—such that likely employer filings are up more than 7 percent for the first half of this year compared to last. Assuming this trend holds, then the annual total is on track to be just shy of 2021's record amount. That year's total was supercharged by a wave of adjustments across industries and business models and a surge in Americans striking out on their own as the country adapted to the pandemic shock.