Today, the Census Bureau released data confirming that the US remains in the midst of a surge in entrepreneurship, after decades of declining dynamism. There were 5.0 million new businesses created in 2022, according to today’s estimates – a 42% increase from pre-pandemic levels. In spite of recessionary fears and labor market uncertainties, many Americans still believe the time is right to start a business. This new crop of young businesses looks quite different from prior years because who is starting these firms, where they are created, and what they look like continues to evolve, expanding opportunity to more people and places.
In 2020, in the midst of the COVID-19 pandemic, there were nearly one million more new businesses created than in 2019 – the first time new business creation surged during a recession. Recent survey data from Gusto indicates that this spike in entrepreneurship has been driven by pandemic-induced disruptions and is led by women and entrepreneurs of color. In 2021, 49% of new business owners were women, up from 29% before the pandemic; the share of entrepreneurs who identify as Black or African American has increased from 3% in 2019 to 9% in 2021. These small, young businesses are the engines of job creation in the US, and supporting their growth will be the key to creating sustainable and equitable long-term economic growth.
Business growth is following population growth
The top ten states for new business applications include several states where business growth appears to be correlated with a surge in population growth. Four of the top ten states in business growth are also in the top ten in population growth including Florida, Utah, Delaware and Arizona, and none are in the ten-fastest shrinking states. While the number one state for new business growth Wyoming provides favorable tax regulations for businesses.
Interestingly, we had seen states in the Midwest, like Michigan and Wisconsin, have among the highest quit rates during The Great Resignation, and this data suggests that many in that region may have quit their jobs to start a new business.
