The Start-Up Boom
The US Census reports new business formation is up 30% this year vs last year nationwide. Where are the numbers highest? California and Florida, each reported around 8000 new business applications in week 45 – November 7 2020. By the numbers these states were highest.
California new business applications are up 24% this year despite the pandemic and the tough business climate. Activity is up compared to the past few years. In 2019 California new business formations were up 12% but were down 7% in 2018.
The Census Bureau tracks business applications as indicated by applications for an Employer Identification Number (EIN).
California is often seen as the bad place to start a business with its recent wildfires, smoke, regulations and high housing costs. Now COVID 19 has set up a migration out of state according to reports. But those that stay may be taking advantage of new opportunities.
Ironically Covid appears to have juiced plans to get into a new business across the nation where we are experiencing the busiest year perhaps ever (see chart).
The Census Bureau reported in October that nationwide Business Applications for the third quarter of 2020, adjusted for seasonal variation, were 1,566,373, an increase of 77.4 percent compared to the second quarter of 2020.
Last week the Wall Street Journal noted the trend reporting that laid off employees are often turning into entrepreneurs launching their own businesses given the state of the economy and the new stay-at-home trend.
Recently Forbes called the trend a “startup boom.” John Haltiwanger, an economist at the University of Maryland, said that within the first two months of the virus outbreak, there was a noticeable rise in new business applications. Working on a project with the government provided him with official data detailing new business formations. He was flabbergasted as he saw the upward trend of new business applications. Haltiwanger pointed out, “The third quarter of 2020 is the highest quarter of applications we’ve ever seen.”
Another analysis of weekly applications from new businesses likely to be employers of people, not just very small businesses – shows a downturn this past spring and a ramp up by summer following perhaps the passage of millions dollars in stimulus funds by the federal government allowing potential entrepreneurs a chance to make a big change in their lives.
Here is a chart.