Sole Proprietors and Self-Employed Workers Show Strong Gains Statewide

New Jersey's economy may still be lagging, but most nonemployer businesses show solid growth, both in total number and total receipts

The recovery of New Jersey’s economy may continue to be slow, but one sector — the self-employed and other businesses without paid employees — has been steadily increasing, according to data from the U.S. Census Bureau.

Statistics released last spring for nonemployer businesses (like a CPA or a freelance writer) show that both the number and the total receipts have been rising in New Jersey and in most of its counties. Statewide, there were 620,282 businesses without paid employees in 2012, an increase of a little less than 1 percent from 2011 and up 5 percent over 2007, the year in which the recession officially began. Receipts for those businesses rose to $35 billion, a 3 percent increase over one year and 8 percent higher than in 2007.

The increases follow a national trend, according to census officials. In the United States, the number of nonemployer businesses — ones without paid employees that are subject to federal income taxes and have at least $1,000 in business receipts — reached 22.7 million in 2012, up 1.1 percent from 2011 and almost 4 percent from 2007. The number of these businesses has grown by more than a quarter over a decade.

The average revenue per business nationally was $45,000 in 2012. In New Jersey, it was $56,554. Nearly all industry sectors experienced growth in both the number of establishments and the receipts nationally. That was not the case in New Jersey, however, as there are fewer businesses in about a third of the individual sectors, both compared with 2007 and 2011.

Two of the state’s three largest self-employment sectors did experience growth: 1) professional, scientific and technical services — 109,543 businesses with $5.8 billion in revenues and 2) real estate — 88,126 businesses with $8.7 billion in revenues. The third largest, construction, has fewer firms than in 2007 or 2011, and while receipts have not recovered to their 2007 levels yet, they are higher than in 2011. Construction in New Jersey had 53,368 businesses with $3.6 billion in revenues. Nationally, the construction sector declined, as did the healthcare and social assistance sector.

Growth in the self-employed segment is important to the economy because more than three-quarters of all businesses are this kind of sole proprietorship. “Nonemployer businesses represent entrepreneurship in perhaps its purest form, including the classic ‘mom and pop’ shops and people running businesses out of their homes,” said William Bostic Jr., the associate director for economic programs at the Census Bureau. More than 86 percent of nonemployer businesses nationally are sole proprietorships.

Bergen County, the state’s most populous, had both the most establishments, 84,545, and the most revenues, $5.7 billion. The least populous county, Salem, also had the fewest number of businesses, 2,839, with the lowest total revenues, $122 million. The lowest average income was $43,152 in Salem, while the highest was $69,366 in Morris.

The greatest increase in the number of firms since 2007 was 14.7 percent in Essex County, while the largest decline was 8.6 percent in Salem. The same county almost lost the most firms between 2011 and 2012 — 3 percent — while Somerset had the largest one-year increase of 2.2 percent.

The largest one-year revenue increase was 6 percent in Ocean, while revenues dropped 4.4 percent in Salem between 2011 and 2012. Hudson had the largest rise in revenues from 2007 — 14.2 percent — while the biggest drop was 4.8 percent in Warren County.