The pandemic-era small business boom
Americans are starting new businesses at a rapid clip — and that's a great sign for the economy.
By the numbers: There were 5.4 million applications to start companies in 2021, a 53% jump from pre-pandemic levels in 2019, according to census data.
- A third of those were classified as "high-propensity applications," meaning they're new businesses that are likely to create jobs.
- And entrepreneurs aren't slowing down: There were 430,000 applications in January, per data released this week.
What's happening: A slew of factors are coming together to create an environment ripe for entrepreneurship.
- The pandemic gave people time and resources — in the form of stimulus checks and money saved by staying home, among other things — to start new businesses, Julia Pollak, a labor economist at ZipRecruiter, tells NPR.
- The rise of the stay-at-home economy created new business opportunities in areas like food delivery, human resources consulting and e-commerce.
Worth noting: This small business boom comes after one of the least entrepreneurial decades in U.S. history, the 2010s.
Between the lines: Many of the people quitting their jobs as part of "the Great Resignation" are doing so to start their own companies.
- "It's a related phenomenon," Steven Davis, an economist at the University of Chicago Booth School of Business, said during a roundtable hosted by the Economic Innovation Group on Monday. "People are looking for working arrangements that are more suitable to how they want to live their lives."
- And for many, that means working for themselves.
- Industries leading in small business creation are online retail, trucking and warehousing, and professional, tech and scientific services, John Haltiwanger, an economist at the University of Maryland at College Park, said at the EIG roundtable.
Yes, but: Even though entrepreneurship is surging, the majority of the businesses people are starting during this boom will fail, Haltiwanger says.
- Still, it's not only a good time to start a new company, it's also a good time to fail.
- We're in a hot labor market with millions of open jobs, which means "the folks who fail can land on their feet," says Haltiwanger.
Fun fact: One study found that Google searches for "how to start a small business" jumped 124% in the first six months of the pandemic.