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New Business Applications

Business Starts

New Business Applications are through the roof slightly down from 2021. Small business is the backbone of the country.

In the early years of the pandemic, Americans filed a historic number of applications to start new businesses — importantly, ones that were likely to employ other people.

  • New data shows that explosion of entrepreneurial activity continued last year, even as inflation and recession fears soared.

By the numbers: There were 1.7 million applications for new businesses that were likely to hire employees in 2022, according to the Economic Innovation Group, a bipartisan organization that analyzed data from the U.S. Census.

  • That’s down slightly from 2021’s all-time record of 1.8 million, but still well above pre-pandemic norms. Last year’s applications are up nearly 28% from before the pandemic.

Why it matters: The lasting surge in applications could be a leading indicator of greater economic dynamism — more jobs, innovation and productivity advancements — all of which drive long-term growth.

  • What they’re saying: “The steadiness in application levels exhibited over the course of 2022 offers optimism that the pandemic may have delivered a lasting, positive shock to American entrepreneurship,” EIG’s Daniel Newman and Kenan Fikri wrote.

The intrigue: Across most sectors, there are more applications for new firms, which are likely to employ more workers.

  • That includes industries that experienced boom times as consumers shifted their behavior, including transportation and warehousing; new business applications there are a whopping 51% above 2019 levels.
  • Just four sectors (out of 19 tracked by the Census Bureau) saw business applications last year at or below pre-pandemic levels, including agriculture and education.

In every single state, the number of these filings trumped pre-pandemic levels.

  • Regionally, the South is experiencing the biggest start-up boom relative to 2019, while the smallest increase since 2019 was seen in the Northeast.

The bottom line: The pandemic stirred up more American entrepreneurial ambitions than any other period on record. Incoming data will offer more clues about how many of these applications transform into full-fledged hiring businesses.

  • But looming threats of inflation and recession did not appear to dampen start-up hopes.

What to watch: “As the Federal Reserve continues tightening monetary policy and the probability of a recession rises, many of these new businesses — a significant chunk of which were likely founded by first-time entrepreneurs — may not survive,” the researchers write.