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Source: John Haltiwanger, “Entrepreneurship During the COVID-19 Pandemic: Evidence from the Business Formation Statistics,” National Bureau of Economic Research: Working Paper Series, June 2021.
Commentary: The COVID-19 pandemic has undoubtedly been a massive economic disruption to big and small businesses alike. Business closures and labor-market distortions due to the pandemic shocked the U.S. economy, emulating past hardships like the Great Recession. Yet while economic growth, productivity, and rates of entrepreneurship fell in patterns like those in the Great Recession, U.S. entrepreneurship appears to be stabilizing far better this time around. A notable indicator of this ongoing aspect of recovery from the pandemic is the number of applications for new businesses.
New research from the National Bureau of Economic Research has found that while the volume of applications fell persistently in the immediate wake of the COVID-19 pandemic and in both the immediate and long-term wake of the Great Recession, the pace of applications for new businesses reached an all-time high in the latter half of 2020, maintaining an increased volume of applications into the present moment. Their study examines the U.S. Census Bureau’s weekly and monthly Business Formation Statistics survey, which began in 2004. The NBER study compares volumes of applications filed for both employer and non-employer U.S. businesses from the inception of the Census Bureau survey to the present. In the record year of 2020, the number of applications for new businesses rose more than 20 percent from 2019 levels. This growth rate is more than double the previously observed maximum growth rate of new business applications. The observed spike and stable rise in new business applications is a strong indicator of a surge in new businesses and of the U.S. economy’s continuing recovery from the Covid-19 pandemic.
As The Economist noted, “far the largest area, accounting for almost one-third, was retail and in particular e-commerce. The Biden administration may be gearing up antitrust agencies for an assault on technology giants that dominate this area. But new entrants apparently see opportunities.”