In the GoDaddy/UCLA Anderson Forecast Microbusiness Activity Index Series 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. This increase shows how small business activity growth accelerated in the fourth quarter of 2021.

“Two possible reasons could explain this increase in the composite 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 may be seasonality in online activity. As the index is only in its second release, there is not enough data as yet to evaluate the magnitude, if any, in the seasonality.”

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“In our first report — ‘What Drives Microbusiness Formation and Growth?’ — which we released last July, we documented 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,” Yu says.

In July 2021, Bengali and Yu created the pioneering indexes 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 indexes were 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 to provide a unique view into the demographics and needs of entrepreneurs.

“The Microbusiness Activity Index Series 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, as a composite index, has three even-weighted sub-indexes. 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 rates of online microbusinesses and online microbusiness owners. The participation index increased from 100.36 in September to 100.44 in December. 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, which indicates more engaged online microbusiness activity even though their formation and growth, represented by the participation index, are rather mild.

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