Starting up new businesses turned out to be a trend during the worst of the pandemic. And the rate of new business formation has stayed high, even though the country has opened back up and unemployment has gone way down. Last month, business applications increased 4.5% from the month before, according to new data from the Census Bureau.
When an economic crisis hits, entrepreneurship often jumps, says Sameeksha Desai, a professor at Indiana University.
“That is often, not always, but often driven by people who may be exiting the wage labor market, right. So perhaps, pushed from unemployment into self employment,” said Desai.
But even with unemployment at historic lows, people are still starting a lot of new businesses, says John Haltiwanger, an economics professor at the University of Maryland.
“Something’s become unleashed in this period of time, where there’s lots of experimentation going on,” explained Haltiwanger.
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Haltiwanger says it’s hard to know why. But, he sees two trends: One, more businesses in the service sector are starting up outside city centers catering to people working from home.
“We see this hollowing out of the downtown area, and this doughnut effect, in terms of the business formation in the surrounding areas,” Haltiwanger
Two, there are more tech startups. Some of that could be workers laid off from big tech companies, though Haltiwanger says it’s too soon to know for sure.