A new record from the US Census Bureau proves that the end of last year followed a pattern similar to what experts consistently saw: Americans officially filed more new business applications in 2020 than any year before.
Year-end data shows that the number of new business applications in 2020 increased 24% from 2019 and was 51% above the 2010-2019 average. Pennsylvania filings rose nearly 24% more than in 2019, and high wealth business filings – those identified by the Census Bureau as the most likely filings to become companies with paid employees – rose nearly 16 in the U.S. % Condition compared to 2019.
This amid a pandemic and recession, when small businesses across the country sought relief or shut down altogether?
Policy think tank Business innovation group The boom report provides some context: there was a rocky start to the year with many businesses freezing their spending and millions of Americans losing their jobs, essentially disrupting all likely filings during that time. But in late summer and for the rest of the year, the rate of new apps rebounded and lasted just under 4.5 million uses in total.
Yes, the trend is an anomaly: this looks different from the last major recession in 2008-2009, the report’s authors wrote. Jimmy O’Donnell, Daniel Newman and Kenan idea.
This time around, the economic fundamentals remain strong for many industries and households, especially those with high incomes. (A pertinent reminder: the stock market is not the economy, and the US is in the middle of a K-shaped recovery that likely still has people who were financially healthy before the pandemic.) Are housing, credit, and financial institutions strong in this crisis in contrast to the recent recession.
“Most recessions involve individuals suffering from lack of money and the reluctance of financial markets to lend, reducing the chances of starting a new business,” the researchers wrote. “Typical downturns are also associated with much greater uncertainty in the medium to long term, while many assume the pandemic will recover relatively quickly, even if the goalposts keep moving.”
The industry that caught the most buzz in 2020 was retail, according to the report, especially in non-store retail, where entrepreneurs sell things directly to consumers. New business applications grew more rapidly in certain parts of the country, such as the South and the Rust Belt, while the Pacific Northwest states actually saw declines.
It will take time to see how many of these business applications will become enterprises, but maintaining this “healthy entrepreneurship break” will be vital to the continued economic recovery, the report said.
“COVID-19 was a social, cultural and emotional shock such as we have not seen in generations,” the authors wrote. “Becoming an entrepreneur is a deeply personal choice and the pandemic may have spurred many to embrace it.”
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