EVOLVE NEWS
A Tale of
TWO ECONOMIES
It was the best of times, it was the worst of times. With apologies to Charles Dickens, his opening line from“ A Tale of Two Cities” could just as easily be the theme of the U. S. economy in 2025.
With inflation continuing to ease and the job market remaining solid, things are looking pretty good on Main Street. But worries over tariffs and trade policy have fueled uncertainty on Wall Street resulting in a wild ride for equities investors. And according to the University of Michigan’ s Consumer Sentiment Index, consumer confidence declined in April for the fourth consecutive month to its lowest level since July 2022.
So where does that leave consumers, small-business owners and C-Suite executives? Unlike the old Wall Street cliché to“ sell in May and go away,” getting a handle on where the economy is and where it may be heading is almost a full-time job these days. And that means taking a few dives into the statistics.
For this little intellectual and financial exercise, the U. S. Census Bureau’ s latest Business Formation Statistics offers an interesting example of how economic reports sometimes tell us data that can be harder to fathom than at first blush.
According to the report published earlier this month, nearly 450,000 business applications were filed in April, down almost a full percentage point from March. Those applications, according to the Census Bureau, are projected to result in the creation of more than 28,000 new businesses within four quarters.
The Bureau uses data from applications for Employer Identification Numbers through the Internal Revenue
Service and the agency’ s Business Register and Longitudinal Business Database to track the timing of the first payroll tax filings for businesses.
Now at first glance, the decrease from March to April could be seen as a sign that the economic headwinds from the restructuring of American trade and tariff policy are a drag on entrepreneurial activity. It is not unreasonable to assume – or at least postulate if you are an economist – that uncertainty and volatility cause a cooling down of new business formation as people wait to see how things play out with trade negotiations and interest-rate policy. And that could be spot on. But maybe the numbers aren’ t telling the whole story. In 2024 5.2 million business applications were filed by people looking to grab their piece of the American Dream. Even by the Census Bureau’ s calculus, those applications resulted in the formation of more than 300,000 new businesses across the country. If we take the number of business applications in April as the baseline, even though it represents a decline from the previous month, which still translates to a projected 5.4 million business applications in 2025, i. e. an overall increase.
So even though the monthly data shows a decline, the overall result is still likely to be a net annual gain. In other words, the Census Bureau’ s report, like so many other economic and financial reports, can represent both sides of the economy – the expanding side and the contracting side – at the same time.
While that makes understanding economics that much more confusing, it is also a little comforting.
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