Startup Surge Amidst the Pandemic in 2021
An article we liked from Economic Innovation Group:
The Startup Surge: Business Formation in 2021 on Pace to Break Record
The latest release of Census Bureau’s Business Formation Statistics data shows that nearly 1.4 million applications have been filed to form new businesses likely to hire employees through September of 2021 — the most through the third quarter of any year on record.
Likely employer businesses are a subset of total applications capturing those most likely to hire employees if and when a business becomes operational (Census labels them as “high propensity applications”). The brisk pace means there have been roughly 409,000 more filings in 2021 than at the same point in 2019, or 255,000 more than at this point in 2020. The surge in new business formation began to take off in the middle of last year, and monthly filings this year have remained well above historical norms, an indication of the trend’s staying power.
The lack of strong new business formation in the wake of the Great Recession hindered the country’s economic recovery for years, but the economic resurgence from the pandemic is shaping up quite differently. Last year, applications to form new businesses — both sole proprietorships and businesses likely to hire and grow — reached unprecedented levels, with likely employer applications totaling around 1.5 million by year’s end, or just over 210,400 more than in all of 2019. Entrepreneurial interest seems even higher in 2021, which now claims six of the top 10 months for likely employer business filings on record. With three months left in this unparalleled year, it now seems almost certain that the elevated pace of business formation in 2021 will be sufficient to surpass the record-breaking total of 2020. The shock of the pandemic appears to have caused significant restructuring of certain industries and a realignment of some relationships between businesses and customers, hastening an end to the startup stagnation that defined the post-Great Recession economy.
Business formation appears to be on a record setting pace in 2021
A record-breaking 1,396,800 applications to form new businesses likely to hire employees have been filed in the first nine months of 2021, 41 percent more than at this point in 2019 (including nonemployers, all business applications are up by 58 percent). The pace is even 22 percent above the exceptional volume filed through September of 2020, when more than 1.1 million applications had been tallied amid an unexpected boom in potential business formation. However, the totals for the third quarter of this year are down by about 14 percent year over year — July to September of 2020 was the peak period for new business filings last year. Even though the brisk pace has cooled somewhat as 2021 progressed, the September total of 145,600 filings remains well above the pre-pandemic average of 108,000 for the month.
Industries highly affected by the pandemic showed the largest gains
The new business surge is broad-based and happening across almost every industry sector, as applications for new likely employer businesses through September were up across all major industry categories except agriculture and mining relative to 2019.
Despite this pervasiveness, new applications are concentrated in areas of the economy most affected by the pandemic. Nearly three-quarters of the gains over 2019 levels appear in just four industry sectors: accommodation and food services; retail trade; health care and social assistance; and...
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