New biz growth is up nationwide in 2023 (so far)

New business creation hit a record high in 2021 — an unexpected effect of the COVID-19 pandemic, which saw a huge number of job losses lead to millions of Americans striking out on their own. Nearly 5.5 million businesses were formed in 2021, including 1.8 million considered “likely employers,” or those likely to hire employees.

2022 stayed strong, with only a slight dip in applications for these likely employers — 1.7 million. So far, 2023 is on track to come close to that year’s number: An Economic Innovation Group (EIG) analysis of the latest US Census Bureau Business Formation Statistics data counts a 7% increase in likely employer applications compared to the first six months of last year.

When compared to the pre-pandemic, half-year baseline of likely employer applications, the nearly 871,000 applications filed so far in 2023 is up 36%.

See the report

Many US counties, saw increases well over 7%, both in southern cities and in rural communities outside of the urban business hubs. Places like Burke County, Georgia and Mobile County, Alabama, more than doubled their numbers of applications.

One reason may be that, as remote work surged and people relocated, parts of the South and West saw a burst of population growth. However: Some of the fasted-growing southern counties are low-population rural areas that have had no notable population growth.

“Some of the leaders are likely advantaged by starting from very low bases, and indeed poverty rates and minority shares of the population are some of the strongest correlates with business application growth,” EIG analyst Daniel Newman writes.

In other words, the data suggests that poor, rural Black people were motivated by the pandemic to start businesses. Since many of these high poverty counties had fewer businesses to start, what might be an average number of new businesses in some areas are an explosion there.

How Technical.ly markets are faring

The five markets Technical.ly covers — Philadelphia, Delaware, Baltimore, DC and Pittsburgh — are situated in the upper South and lower North coastal region that makes up about half of the mid-Atlantic region. Pittsburgh may be thought of as the Midwest, or the mid-Atlantic.

All markets combined saw an average of 38% growth in the change number of business applications from 2019 to 2022:

• Delaware averaged the highest growth, at 71% statewide. New Castle County, where Wilmington is located, saw a 72.5% increase in business applications. Small town/rural Kent County, where the capitol, Dover is located, increased by nearly 100%, while rural/coastal Sussex County saw an increase of 53%.
• Allegheny County, Pennsylvania, where Pittsburgh is located, saw a 37% increase.
• Philadelphia County went up 35%, counting nearly 30,000 new applications in 2022.
• Baltimore City saw a 28% increase in applications, while Baltimore County saw a 30% increase.
• Washington County, where the District of Columbia is located, saw an increase of 16.7%

Why so much new business growth?

As Technical.ly reported in February: Clearly, the numbers from the past five years show that the pandemic made a huge impact on the rate of new businesses. Emergency funding like the CARES Act made supporting entrepreneurship one of its priorities.

“We can look back on the pandemic period now and see that entrepreneurship was a really useful safety net for people with all the disruptions that have gone on in the economy and individual life over the past three years,” said John C. Haltiwanger, professor of economics at the University of Maryland and former chief economist of the US Census Bureau, earlier this year. “Unprecedentedly large numbers of Americans did strike out on their own, in part because they had the financial security to do so during the pandemic era, which was a very unusual recession where financial markets actually did quite well and prices were really high.”

To keep the growth trajectory, continued support from policymakers will be necessary. That could include preventing noncompete agreements that previously blocked professionals from starting their own companies, or “portable” benefits or retirement accounts — “because clearly, there’s a big shock and push in that direction.”