GoDaddy and UCLA Anderson Report That Activity Index for Microbusinesses in the U.S. Increased in Fourth Quarter 2021
California report finds that states with stringent pandemic mitigation measures, such as California, had better health and economic outcomes
Los Angeles (March 29, 2022) — In the GoDaddy/UCLA Anderson Forecast Microbusiness Activity Index update for fourth quarter 2021, UCLA Anderson Forecast economists Leila Bengali and William Yu report that the Microbusiness Activity Index for the U.S. increased from 100.3 in September to 102.1 in December. The report was finalized in February 2022.
“Two possible reasons could explain this increase in the online microbusiness index,” Bengali and Yu write in the report. “First, overall U.S. economic growth accelerated in the fourth quarter of 2021. Second, there is seasonality in online activity. When there are a sufficient number of observations, we plan to release a seasonally adjusted index.”
Regarding the first point — that overall U.S. growth accelerated in the last part of 2021 — Bengali and Yu point out that U.S. quarterly gross domestic product (GDP) growth in 2021 was 6.3% in first quarter of 2021, 6.7% in the second quarter, 2.3% in the third quarter and 6.9% in the fourth quarter. “The level of the microbusiness index seems to be moving in the same direction as GDP growth,” Bengali and Yu write. “Note that in our first report in July 2021 — ‘What Drives Microbusiness Formation and Growth?’ — we document evidence of correlations between the macroeconomy and microbusinesses. For example, each additional one-unit gain in the index is associated with a 0.1 percentage point decline of the unemployment rate.”
In July 2021, Bengali and Yu created the pioneering index to track the activity of online microbusinesses at the national, state, CBSA and county levels, which demonstrated for the first time the activity of an important, but often overlooked, driver of the economy. The index was developed based on data provided by GoDaddy’s Venture Forward, a multiyear research initiative to quantify the impact of 20 million online microbusinesses on local economies and provide a unique view into the demographics and needs of entrepreneurs.
“The Microbusiness Activity Index can help policymakers benchmark performance,” said Jeremy Hartman, vice president of Venture Forward at GoDaddy. “They can use it to support and invest in their local microbusinesses and in return drive their economies.”
The Microbusiness Activity Index has three components. The first is infrastructure, which includes human capital and digital infrastructure, such as broadband and computer access, assessing how ready a community is for microbusinesses to take root. These are long-term factors that do not change from one quarter to the next. Next is participation, which includes the density and growth rate of online microbusinesses and online microbusiness owners. The participation index declined from a peak of 101.32 in January to 100.36 in September, and slightly rebounded to 100.44 in December. This is consistent with the slowdown in small business creation (in response to the pandemic) in the later months of 2021. The third and final component is engagement, which captures activity levels through a variety of measures of online and website engagement. The engagement index increased markedly from 99.86 in September to 105.85 in December. As mentioned earlier, this could have been driven by both general economic activity and seasonal patterns in online engagement. Over time, as we gather more time series data, the authors will be able to determine the role of seasonality in index fluctuations.
Read the full report.
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About UCLA Anderson Forecast
UCLA Anderson Forecast is one of the most widely watched and often-cited economic outlooks for California and the nation and was unique in predicting both the seriousness of the early-1990s downturn in California and the strength of the state’s rebound since 1993. The Forecast was credited as the first major U.S. economic forecasting group to call the recession of 2001 and, in March 2020, it was the first to declare that the recession caused by the COVID-19 pandemic had already begun.
About UCLA Anderson School of Management
UCLA Anderson School of Management is among the leading business schools in the world, with faculty members globally renowned for their teaching excellence and research in advancing management thinking. Located in Los Angeles, gateway to the growing economies of Latin America and Asia and a city that personifies innovation in a diverse range of endeavors, UCLA Anderson’s MBA, Fully Employed MBA, Executive MBA, UCLA-NUS Executive MBA, Master of Financial Engineering, Master of Science in Business Analytics, doctoral and executive education programs embody the school’s Think in the Next ethos. Annually, some 1,800 students are trained to be global leaders seeking the business models and community solutions of tomorrow.