Weekly Update on COVID-19’s Impact on Business Formation and EntrepreneurshipAug 6, 2020
In April 2020, EIG began tracking COVID-19’s impact on prospective entrepreneurial activity in the United States in a blog post analyzing new weekly data on business formation provided by the U.S. Census Bureau. EIG will continue to provide updates of this dataset to keep a pulse on the latest trends in business formation. The statistics below focus on high-propensity business applications, a specific subset of business applications identified by the Census Bureau as having a high likelihood of turning into true employer businesses.
Nationally, high-propensity business applications remained elevated well above historical trends in week 31 of 2020 (the week ending August 1st). The gap in expected new business filings that opened up during the initial stages of the pandemic has been more than compensated for by the past several weeks of unusually high application numbers.
Last week, 39,820 new high-propensity business applications were filed. This is 15,740 higher than the number of applications registered in the same week of 2019, representing a 65.4 percent jump.
Three factors may lie behind the recent spike even as the nascent economic recovery stalls and the pandemic spreads. First, some of the surge over the past few weeks probably reflects a backlog of delayed applications finally being submitted. Applications are a forward-looking measure of new business starts, so many would-be entrepreneurs may have only temporarily shelved their business plans in the early weeks of the pandemic. However, the surge could also be powered by newly unemployed individuals opting to start their own businesses, either by choice or out of necessity. Finally, some of the surge could also represent future entrepreneurs seeing opportunity in the crisis. The available data does not allow us to estimate which force or combination of forces is at work.
This week’s robust figures continue the trend of making up for the dearth of promising new business applications that initially appeared in March. The number of high-propensity business applications during weeks 10 (the onset of COVID) through 31 of 2020 is now greater than the number filed over the same period of 2019 by 40,380, or 7 percent. In total, there have been 872,190 high-propensity business applications recorded so far in 2020. That figure is 5 percent higher than the 828,090 applications registered in 2019 over the same time period.
The chart below displays the number of high-propensity business applications each week in 2019 and 2020, as well as in 2009 for comparison to trends during the Great Recession.