The pandemic has sparked an American entrepreneurial increase – and it appears prefer it’s right here to remain

• Americans filed over five million new business applications in 2022, the second-highest number on record.
• The pandemic may have delivered a “lasting, positive shock” to American entrepreneurship.

The pandemic may have forever charged America’s entrepreneurial spirit.

According to data from the US Census Bureau, Americans filed 5.1 million new business applications in 2022, which translates to about 14,000 new business applications every day last year. It was the second-highest year on record – down slightly from 5.4 million in 2021 – and remained well above the 3.5 million filed in 2019.

According to an analysis by the Economic Innovation Group, a nonpartisan research organization, 1.7 million of those applications were for companies likely to employ workers. This was also the second-highest year on record, surpassing the 1.3 million applications filed in 2019. In all 50 states, the number of these applications was higher than before the pandemic.

“The consistency in application numbers seen throughout 2022 provides optimism that the pandemic may have delivered a lasting, positive shock to American entrepreneurship,” wrote EIG’s Daniel Newman and Kenan Fikri in a report released this week.

As the pandemic took hold and Americans flocked to streaming entertainment, at-home fitness, food delivery and e-commerce, many large incumbents thought this shift would be a permanent acceleration — and so they hired en masse. But today, companies in these industries are anticipating the possibility of getting a little ahead of their skies, and that’s coming in the form of layoffs at companies like Meta, Netflix, Amazon, DoorDash, and Peloton.

However, the surge in US entrepreneurship, sustained by inflation, supply chain disruptions and recession fears, may be a more apt example of an enduring consequence of the pandemic era.

Experts have pointed to several explanations for the rise in new business applications in recent years. As millions of people lost their jobs in 2020, many decided to start businesses to make ends meet, a trend consistent with previous economic downturns. Childcare responsibilities pulled parents out of the workforce, and self-employment offered some the flexibility they needed. As workers reconsidered their working lives and sought job flexibility, some of the Greats embraced resignation and chose to work for themselves. Finally, as inflation soared, some people bet that starting a business was their best chance of getting ahead financially.

The greatest growth in new business filings came from the southern region of the US — specifically Mississippi, Alabama and South Carolina — with filings in the region increasing by more than a third compared to 2019. On a per capita basis, Wyoming, Delaware and Florida led the nation in applications last year. In the industry, applications for transportation and warehousing, lodging and catering, and healthcare companies have paved the way.

Many of the reasons for self-employment, like the need for parents to stay home with their kids studying at correspondence school, are less relevant today, suggesting America’s entrepreneurship may normalize in the years to come. But 2022 data suggests a new normal is possible.

“The nature and long-term effects of the boom will become clearer over time,” says the EIG report. “But this wave of supply-side experimentation suggests that the pandemic has revived American economic momentum, at least to some extent.”

However, not all roses may be ahead for new entrepreneurs.

While entrepreneurship is widely viewed as a positive force for the American economy, how many of these new ventures will eventually fail? According to EIG, startups are “notoriously vulnerable” and in “good years” about one in seven companies less than five years old fails. In “bad years” it’s closer to one in five.

And if the U.S. goes into recession, some companies formed during that time could be “permanently subscribed.”

“As the Federal Reserve continues to tighten monetary policy and the likelihood of a recession increases, many of these new companies — a significant portion of which are likely to have been founded by young entrepreneurs — may not survive,” the report said.