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Expand chart
Data: Census Bureau via John C. Haltiwanger of the University of Maryland; Chart: Axios Visuals

One of the most unexpected pandemic winners might just turn out to be new small businesses.

Why it matters: The number of entrepreneurs starting a business easily hit a record high in 2020, according to a new analysis by University of Maryland economist John Haltiwanger. That's a surprising result, given the severity of the crisis.

The big picture: It's now much easier than it was in 2008 to start a small business selling goods or services online.

  • By far the largest single sector of new business formation is "nonstore retailers," who account for one of every three new businesses formed over the pandemic. They were helped at every step of the process by e-commerce platforms such as Shopify and Stripe, which wasn't even founded until 2009.
  • Be smart: Renting space on Instagram is a lot easier, and can scale a lot more quickly, than renting a storefront.

Physical businesses have been booming too — but largely in states where rents are relatively low, like Texas, Florida, and Georgia. Those states have seen much more new business formation than high-rent California, New York, and New Jersey.

  • When the Wall Street Journal told the story of how businesses on one Chicago street are coping with the pandemic, it found that out of nearly 50 businesses on the strip, five had closed permanently — while 10 new businesses had arrived.
  • Sectors seeing a lot of new openings include laundromats, trucking, and, possibly surprisingly, restaurants.

How it works: One of the biggest differences between the crises of 2008 and 2020 is that the former was associated with an extreme lack of money, while the latter saw an abundance of it.

  • In 2008, Americans lost billions of dollars in home equity, even as the stock market was crashing and banks stopped lending.
  • The pandemic, by contrast, unleashed trillions of dollars in new government spending, much of it targeted directly at small businesses in the form of forgivable Paycheck Protection Program (PPP) loans that helped prevent many small businesses from closing. There was also — thanks in large part to the Federal Reserve — no financial crisis. As a result, America's banks have been financially strong throughout, and in fact have been desperate to find businesses to lend money to.
  • A surging stock market has also helped provide up-front capital that some entrepreneurs need.

Of note: "The surge in applications for likely employer businesses is arguably not because of, but despite, the PPP program," writes Haltiwanger. After all, PPP money went only to old businesses, thereby giving them a competitive advantage with respect to anybody who wanted to start a new business after February 2020.

  • Government help was also frequently slow to arrive, which implies that the real driver of new business formation was not the government but just the underlying wealth and hopefulness of individual Americans.

Yes, but: There's no solid data on how many small businesses closed during the recession. A recent Fed paper, however, suggests that about 130,ooo firms went out of business in the first year of the pandemic — up between a quarter and a third from normal levels, and much lower than many economists originally feared.

The bottom line: If the Fed's number is accurate, the total number of small businesses may have gone up, not down, over the course of the pandemic. Either way, what's certain is that Americans have been starting small businesses at an unprecedented pace.

Go deeper

Stock buybacks boom as corporate cash piles grow

The Delta variant is keeping more companies cautious about how to invest the mountains of cash they have at their disposal. That hesitancy has led, in part, to corporate spending on stock buybacks outpacing capital expenditures this year. 

Why it matters: Companies hoarded cash and raised prices over the past year — leaving them with a lot of money and decisions about what to do with it.

Ohio sues Biden admin over reversal of Trump-era abortion referral ban

Ohio Attorney General Dave Yost. Photo: Justin Merriman/Getty Images

Ohio Attorney General Dave Yost filed a lawsuit against the Biden administration Monday over a Trump-era ban on abortion referrals that President Biden overturned earlier this month.

The big picture: The lawsuit aims to reinstate two measures included in the 2019 legislation that required federally funded family planning clinics to be "financially independent of abortion clinics," and refrain from referring patients for abortions.

Oklahoma Supreme Court temporarily blocks abortion restrictions

A pro-choice activist demonstrates outside the U.S. Supreme Court on Oct. 4, 2021. Photo: Stefani Reynolds/Bloomberg via Getty Images

The Oklahoma Supreme Court on Monday temporarily blocked three abortion restrictions set to take effect on Nov. 1.

Why it matters: The laws would place new limits on medication-induced abortions and require doctors who perform abortions to attain board certification in obstetrics and gynecology.