New U.S. Small Businesses Boomed During the Pandemic

File this under believe it or not. There’s no question the pandemic put an unprecedented strain on American small businesses, leaving iconic community hubs like New York corner shop Gem Spa (where Lou Reed sought out the famous egg creams) and Chicago greasy spoon Jeri’s Grill (beloved for 3 a.m. biscuits and gravy) gone for good.

But a peek at the numbers suggests America shockingly may have actually gained small businesses in the last year.

A Strong Census for Business

University of Maryland economist John Haltiwanger compiled Census Bureau data on business creation, uncovering that more enterprises were born in 2020 than the year prior:

  • By the 40th week of 2020, the creation of new employer businesses was 17% higher relative to 2019, which Haltiwanger equates to roughly 200,000 more businesses.
  • And a Federal Reserve paper approximated that 130,000 firms went out of business in the pandemic’s first year. That’s at least 25% more than normal, but well below worst case scenarios.

“These findings suggest that the surge in applications in 2020 will translate into an increase in actual startups in 2020 relative to 2019,” wrote Haltiwanger. Trillions of federal stimulus dollars pumped into the economy kept banks stable enough to keep churning out loans, and direct stimulus to small businesses certainly helped some weather the storm.

Street Smarts: “Nonstore retailers” — largely online e-commerce businesses — tallied the most startups, representing a third of all businesses launched during the pandemic. But in states like Texas, Florida, and Georgia (where commercial rents are cheap), new brick-and-mortar businesses are also booming.

One to Keep an Eye On: Perhaps you’ve heard of a little business started in a garage in Albuquerque, that goes by the name of Microsoft? The upstart firm breached a $2 trillion market cap Wednesday. Seems like it has potential.

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