Coronavirus

Americans Are Starting a Staggering Number of Businesses During the COVID-19 Pandemic

In a year that will be remembered for a deadly pandemic that shut down parts of the economy and cost millions of people their jobs, here's one silver lining.

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Thanks to the COVID-19 pandemic, many Americans found themselves with unexpected amounts of free time this year—and many have turned to entrepreneurship to fill the gap.

According to data from the Census Bureau, the number of new business applications filed in the United States surged during the third quarter of this year to nearly double the quarterly average of the past decade. The Census Bureau's data, which are aggregated from various mandatory filings that businesses must make with the IRS in order to obtain a tax identification number, show that more than 1,500,000 business applications were filed between July and September of this year. It's a dramatic spike in new business applications, which average about 800,000 per quarter and rarely deviate very far in either direction regardless of macroeconomic conditions.

Perhaps even more encouraging is the fact that the number of what the Census Bureau calls "high propensity applications" has shot upward too. Those are businesses that have already surpassed several hurdles in the IRS application process and are deemed to have a "high propensity of turning into businesses with payroll."

There's more good news: The growth in new business applications isn't concentrated in any particular part of the country. In fact, the Midwest led the way during the third quarter and every single state reported an increase, according to the data.

Like the record-shattering number of unemployment applications documented earlier this year, the Census Bureau's data about business formation provide a useful snapshot of just how completely bonkers 2020 has been. The pandemic has shifted how Americans work, eat, play, and socialize, and it has upended consumers' demand for products. That disruption has created opportunities for new businesses, and entrepreneurial types have responded in droves.

"The talk is that a lot of folks who became unemployed, alright, most regrettably, but they're sticking with it and they're going out and starting new businesses," Larry Kudlow, director of the White House's National Economic Council, said last month. He predicted that the "gales of creative destruction" would blow through the U.S. economy as the recovery kicked in.

Of course, this isn't really "creative destruction" in the way that Joseph Schumpeter originally described it—that is, as the usual churn of the business cycle that sees new ideas and innovations sweep aside older ones as a matter of course. More than 11 million people are out of work right now, and even though that figure has been falling in recent months, it remains more than twice as high as it was in February. The number of businesses to permanently close during the pandemic continues to grow, and those closures could accelerate as a surge in cases prompts new governmental restrictions on economic activity.

But the number of new startups in the pipeline isn't just a silver lining. It's also a way forward.

"There's been this enormous shock to how we interact with each other, and it's a positive sign there are lots of entrepreneurs out there trying to respond to that," John Haltiwanger, an economics professor at the University of Maryland, told Bloomberg. Haltiwanger, a former chief economist at the Census Bureau who helped launch the agency's tracking of business-creation data, says there's a marked contrast between what's happening now and what happened after the previous recession when startups "got clobbered" and were slow to recover.

That's probably due to the nature of the two economic downturns. The Great Recession was the result of a banking collapse and credit crunch that made it more difficult for startups to borrow money. That's not been the case this time around, thankfully, and the recovery should be relatively quick once the acute public health crisis is behind us.

Economic data aside, the number of new businesses might also say something positive about America's resilience in the face of a once-per-century catastrophe. Yes, unemployment, depression, and suicide rates are rising. Still, starting a business is a fundamentally optimistic endeavor—a bet that things will get better and that there is money to be made in doing so—and more Americans than ever before are taking that shot right now.

NEXT: Supreme Court Considers Whether Trump Can Block Immigrants From Census Counts

Coronavirus Census Entrepreneurship Creative Destruction Jobs Economic Growth

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48 responses to “Americans Are Starting a Staggering Number of Businesses During the COVID-19 Pandemic

  1. He predicted that the “gales of creative destruction” would blow through the U.S. economy as the recovery kicked in.

    Not if cronies in existing businesses can nudge nudge wink wink the government into protecting them.

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  2. How many of these business’s were started after bankrupting, looting and way over-leveraging their last one due to the pandemic? Also those closures that you reference were going to grow no matter what it can’t be overstated how many people are in the red or zombieing along hemorrhaging money or taking loans for some kind of post pandemic boost that will never come from the last lockdown. The level of how badly main street is getting fucked right now is can’t be overstated.

    1. But Boehm has The Party line to shill for.

  3. Imagine how many more businesses will be started during Trump’s second term 2021-2025.

  4. In a year that will be remembered for a deadly pandemic that shut down parts of the economy and cost millions of people their jobs

    The lockdown did that, not the virus, you motherfucking idiot.

    1. Boehm is a fucking asshat.

      1. Sadly, a solid majority seem to be the same kind of asshat these days.

        I am so fucking sick of people talking about this as if everything we have seen is just the natural consequence of a mildly to moderately severe respiratory virus. No, this is a choice that our supposed leaders made and forced on everyone. Evil fucking pieces of shit that they are.

        1. There need to be real personal consequences for these people when this shit is over with. Nuremberg like covid trials.

          1. Except we just allowed these people to steal absolute power.

        2. at least the economic sacrifices were worth the cost, as the virus is totally under control now…. oh wait.

        3. That’s not fucking everybody, zeb, it’s the corporate press (including Reason) drowning out or outright restricting other voices

          1. Oh, I know it’s not everybody and you are quite right. But I do think a majority is willing, if not happy, to follow along and not really question.

        4. SCREEEEEE!

          (Points at Zeb while making the Body-Snatched noise)

          1. Scariest movie I’ve ever seen

  5. Reason Koch trying to justify their future existence now that they are no longer libertarians.

  6. Thanks to the COVID-19 pandemic, many Americans found themselves with unexpected amounts of free time this year

    I suppose that’s one way of looking at suddenly being unemployed. But it’s sort of like being grateful for all the relaxing in bed you’ve been doing since you got run over by that bus. For those living paycheck-to-paycheck and just scraping by, I suspect they don’t think of it as “free time” and perhaps the reason they went out and started a lawn-mowing business or a car-detailing business or a house-painting business was simply as an alternative to starving to death. Give them their jobs back and you’ll see their entrepreneurial spirit disappear in a heartbeat. These people aren’t cheerfully upbeat about their chances of success in business, they’re desperate.

    1. it’s fucking insane we get pieces like this from reason instead of constant drum beating over the fact the gov is openly tyranically telling people they literally can’t go have thanksgiving with their family let alone conduct commerce and forcing everyone to wear burkas.

      1. Yes, it is fucking insane. We can argue about how deadly it really is or how much masks actually do. Fine.
        But anyone still promoting lockdowns or forced business closures or anything like that, when we have had plenty of time to see how incredibly awful the consequences are and how little they do to change the trajectory of an epidemic, is just plain fucking evil or stupid or not paying attention. Pick one. There are no other possibilities at this point.

        1. it’s a deadly combination of malevolence, fear and unwillingness to admit they were on the wrong side and the results were catastrophic. These people committed economic genocide on the working class and medical malpractice on everyone to a level not seen since tuskagee experiments. Admission of error is admission of liability.

          1. Yeah, I’m afraid that at this point the biggest factor is that they will never willingly admit that they fucked it up as badly as they did. People need to demand change, but it appears that most people are also unwilling to admit that “leaders” and “experts” fucked up that badly.

            1. A lot of people also have responded irrationally to the pandemic. They go to extreme lengths to protect themselves in some contexts (and often ineffectively) but then are bizarrely lax (given their panic level) in other areas. I have relatives who are terrified of gatherings of more than half a dozen but who visit and are visited by people in ones and twos all the time. They wail about social distancing one moment and then hug people hello the next. They wear masks when going for a run or pruning a bush but then go to dinner with friends unmasked. People like this tend to be progressive and to trust everything they hear or read from the usual suspects: MSNBC, CNN, NYT, WaPo, etc. Anger against politicians would not only require them to go against tribe (never happen), but also require them to actually think through the pandemic response and not just react.

          2. And you are quite right. This calls for trials for massive human rights violations and crimes against humanity. I’m not holding my breath. I fear this won’t be honestly assessed for a long time, until people can take a detached, historical view of things.

            1. I think by 2024 the consequences for this will be felt by everyone

              1. Yes, but what stories will they tell themselves about why they are feeling it? I certainly hope that people figure it out. But I though that would happen this summer, and here we are. So I’ve lost some of my optimism.

          3. And it’s worldwide, which is unprecedented AFAIK.

      2. “it’s fucking insane we get pieces like this from reason instead of constant drum beating over the fact the gov is openly tyranically telling people they literally can’t go have thanksgiving with their family let alone conduct commerce and forcing everyone to wear burkas.”

        And those should have started along about Feb, 2020 when Newsom instituted the lockdowns.
        Along with rioting in the streets.

    2. Couldn’t be just solo businesses, because these people applied for EINs, which means they anticipate needing employees.

      1. Anticipating needing employees is not the only reason small businesses get an EIN. The biggest one is so that you don’t have to hand out your SSN to all the various entities you perform services for.

  7. Greatest libertarian moment ever!!!!!!

  8. Suggested caption for the illustration: “That’s right, keep stimulating the economy with the invisible hand.”

    https://www.youtube.com/watch?v=mDqsgbtpDLk

  9. There’s more good news: The growth in new business applications isn’t concentrated in any particular part of the country.

    Is it concentrated in any particular sector? Restaurants and Bars, manufacturing, auto sales? Or are these just a bunch of Etsy accounts registered with the IRS?

    1. Assuming that the bullshit will ever end, this is probably a pretty good time to start a restaurant (relatively, anyway, restaurants are always a tough business to succeed in). Lots of locations and equipment freeing up. I’ve been helping a friend this summer get a food business going. Looks pretty promising if they don’t shut down ski resorts again.

  10. yeah, lots of people are out of work and trying to start businesses online. it doesn’t mean they will pan out, or pay more than what they earned before.

    1. How many businesses that were actually productive and employed people have failed forever?

  11. If people are starting businesses, it means they’re optimistic the Biden Administration will give them access to an unlimited influx of highly-skilled labor. Especially from Mexico.

    #OpenBordersWillFixEverything
    #ImmigrationAboveAll

  12. But will they all provide high quality union jobs paying over a measly $15.00/hr?

  13. No surprise here. Millions of Americans have been declared “not essential” and forbidden to be employed in their current occupations, or employed with non-viable restrictions. So if they’re not allowed to work for someone else, they work for themselves. Stuff they can do at home and online rather than an office. It’s a helluva lot easier than it used to be. The main impediment is the government and the IRS.

    1. But they don’t need an EIN to work for themselves, so this is not just that.

  14. Sadly most of those “businesses” are Etsy stores and the like. It’s easy to “start a business” but not as easy to start a successful brick-and-mortar business.

    1. No, look at the article. They’re going by EIN and related filings. These people anticipate needing to hire.

      1. As somebody upthread mentioned, small biz owners get EINs so they don’t have to plaster their personal information everywhere.

  15. That sure is a lot of Only Fans accounts.

  16. Creative destruction is the engine of all real advances and growth.

    “But the number of new startups in the pipeline isn’t just a silver lining. It’s also a way forward.

    ‘There’s been this enormous shock to how we interact with each other, and it’s a positive sign there are lots of entrepreneurs out there trying to respond to that,’ John Haltiwanger, an economics professor at the University of Maryland, told Bloomberg. ”

    As good as is this small persistent fraction of creation, every action and voice for stimulating and / or opening the old dead prepandemic economy cut down the whole of the great creation that we could have reaped.

    1. You know what would have been even better? Not doing things that killed the old economy in the first place. There should never have been any bailout even considered because the bailouts were only needed because politicians decided to kill the economy.
      They are just fucking evil at this point. There is no excuse for still making excuses for these policies.

    2. Having the government bankrupt your business *isn’t* ‘creative destruction’.

  17. The most popular new business startup being “burning and looting”.

  18. Can new take out, mail order and delivery business survive after the pandemic?

Comments are closed.