Health and Healthcare Systems

New business applications in the US hit historic highs last year

This article first appeared on the NBER Digest.
A "Now Hiring" sign sits in the window of Tatte Bakery and Cafe in Cambridge, Massachusetts, U.S., February 11, 2019.   REUTERS/Brian Snyder - RC179706A2B0

New business applications hit an all-time high in July 2020. Image: REUTERS/Brian Snyder

Brett M Rhyne
Contributing Writer, The Digest, NBER
Share:
Our Impact
What's the World Economic Forum doing to accelerate action on Health and Healthcare Systems?
The Big Picture
Explore and monitor how United States is affecting economies, industries and global issues
A hand holding a looking glass by a lake
Crowdsource Innovation
Get involved with our crowdsourced digital platform to deliver impact at scale
Stay up to date:

United States

  • New business applications in the United States fell during the early months of the COVID-19 pandemic.
  • But, by summer 2020 they'd recovered to historic heights.
  • They've remained strong ever since.

The number of new business applications was higher during the summer of 2020 than at any time in the past 15 years, and it has remained strong ever since.

Have you read?

Applications for new businesses plunged in the early months of the pandemic-induced recession, but rebounded before long. In July 2020, applications surged to historic heights, John C. Haltiwanger finds in Entrepreneurship during the COVID-19 Pandemic: Evidence from the Business Formation Statistics (NBER Working Paper 28912).

Haltiwanger studies the Business Formation Statistics, a weekly report from the US Census Bureau based on the number of applications for Employer Identification Numbers (EINs) filed with the Internal Revenue Service. Between 2004 and 2019, he finds an upward trend in “likely nonemployer startups,” businesses that are unlikely to hire any workers, and a long-term decline in “likely employer startups,” those that have a good chance of creating jobs for someone other than their owner. When the pandemic hit, business applications of both types declined.

Surge in new business applications during COVID-19
The COVID-19 pandemic saw a surge in new applications. Image: NBER Digest

While the number of EIN requests dropped from March through May 2020, the count in June 2020 was the highest since January 2019. Applications in July 2020 hit an all-time peak, and in each month between August 2020 and April 2021, the number was higher than in any month between 2004 and the onset of the pandemic. Total applications rose more than 20 percent between 2019 and 2020, a rate of increase more than twice that of any previous year. Haltiwanger also studies the composition of startups, noting that “from March 2020 through May 2021, new applications for likely employers were almost 500,000 greater [than] over a similar period from March 2018 through May 2019.” For likely nonemployer startups, the comparable statistic was an increase of 1.3 million. Three-quarters of the recent surge in startups was concentrated in just 10 industries, including Non-store Retail, which accounted for a third of the growth, Personal, Professional, and Food Services, and Truck Transportation. The rapid growth of likely nonemployer startups, which reflects self-employment activity, highlights the increasing importance of gig workers in the modern economy.

Loading...

To place the recent developments in perspective, Haltiwanger also analyzes the Great Recession. Business startups declined then, particularly among employer startups. For more than a year after the collapse of Lehman Brothers in 2008, the number of applications for employer startups was below the average of the previous two years. Applications for nonemployer startups increased during the Great Recession, but only by about one-quarter as much as during the COVID-19 recession. One explanation for this difference is that financial conditions, which can affect the rate of startup activity especially for new employer businesses, were more robust during the COVID-19 recession than during the Great Recession.

Don't miss any update on this topic

Create a free account and access your personalized content collection with our latest publications and analyses.

Sign up for free

License and Republishing

World Economic Forum articles may be republished in accordance with the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License, and in accordance with our Terms of Use.

The views expressed in this article are those of the author alone and not the World Economic Forum.

Related topics:
Health and Healthcare SystemsEconomic Growth
Share:
World Economic Forum logo
Global Agenda

The Agenda Weekly

A weekly update of the most important issues driving the global agenda

Subscribe today

You can unsubscribe at any time using the link in our emails. For more details, review our privacy policy.

How clean energy solutions at home and in health facilities can greatly benefit child health

Kitty van der Heijden

June 21, 2024

About Us

Events

Media

Partners & Members

  • Join Us

Language Editions

Privacy Policy & Terms of Service

© 2024 World Economic Forum