New business applications in Seattle lag pre-pandemic levels

New business applications in Seattle last year remained significantly below pre-pandemic levels, in one sign the local economy has not yet rebounded.

Why it matters: New business applications are one measure of an area's perceived economic health, Axios' Kavya Beheraj and Alex Fitzpatrick report.

• If lots of people are trying to start new companies in a given city, it's a sign that they're bullish on the area's prospects.

Yes, but: Local officials say other economic metrics are also important, including the area's current low unemployment rate and high number of job openings.

• Plus: A filed application is no guarantee of a healthy, thriving business to follow.

Zoom in: In Seattle, there were 7,710 applications for new businesses in 2022, according to the Office of City Finance.

• That's a 42% drop from the annual average from 2012 to 2019, which was 13,305, per an Axios analysis of the city's data.

What they're saying: Rachel Smith, president and CEO of the Seattle Metropolitan Chamber of Commerce, told Axios that one reason the 2022 numbers may appear low compared to past years is because the city had "explosive economic growth" in the 2010s.

• After the Great Recession of 2008 and 2009, she said, "we have seen just a straight up trajectory of growth in business and economic activity generally until the pandemic."
• That said, quality of life issues — including the area's high cost of housing and struggles with homelessness — could also be contributing to a decline in the number of people wanting to start businesses here, she said.

Between the lines: Markham McIntyre, director of Seattle's Office of Economic Development, told Axios it's not entirely clear what's driving the drop in new business applications.

• But he said it's possible that the high number of jobs available in Seattle right now — coupled with the area's low unemployment rate of 3.1% — could be dampening people's enthusiasm to launch their own startups.

• "I do think there is a correlation between the number of jobs we have open and the reduction in new business applications," McIntyre said.
• "There is a lot of capacity for people to get into jobs with career pathways that have good pay and good benefits — and that's a sign of strength."

Plus: City officials also said the high numbers of new business applications before the pandemic may have been partly due to gig workers such as rideshare drivers formalizing their businesses, plus a new city law requiring licensing of short-term rentals such as Airbnbs.

The big picture: The decline in new business applications is not a uniquely Seattle issue.

• Nationwide, the rate of new business applications per 1,000 people fell 6.6% from 2021 to 2022.
• The greater Seattle metro area also saw a decline during that period, from 13.2 applications per 1,000 residents to 12.4 per 1,000 residents.