A big question for many businesses as the economy recovers is where are the workers? One answer: they may be starting their own business.
Americans in 2021 are starting businesses are a record rate. As of May, 2.5 million new business applications have been filed for this year alone, not adjusted for seasonal swings, according to the Census Bureau. In just 5 months, that’s already more than half of the businesses formed in 2020 – a banner year for growth. Americans started 4.4 million new businesses in 2020, a stunning 24% jump from the year before and the biggest increase on record.
Some of these entrepreneurs lost jobs during the pandemic, according to a report by Peterson Institute for International Economics looking at the unprecedented business formation.
“Higher local unemployment rates predict increases in U.S. entrepreneurship during past downturns,” the report said. “The more limited opportunities in the wage sector may have incentivized entrepreneurship by necessity.”
Others likely took advantage of the billions in government stimulus for both U.S. households and businesses. Even though no direct legislation directly supported new business formation, a May study looking at data at the state level found that the implementation of relief packages directly boosted start-up formation rates.
Many Americans starting these businesses also likely saw a niche to fill during the pandemic. According to the Census data, some of the strongest growth has been in sectors like retail, transportation and warehousing, construction, and real estate.