What Pandemic? New Businesses Are Opening Up by the Millions.
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What is the main topic discussed in this episode?
Here's your money briefing for Monday, September 28th. I'm J.R. Whalen for The Wall Street Journal. More businesses closed during the first three months of the pandemic than usually go under in an entire year. But while that might make it seem like a bad idea to open a new one, some laid-off workers are facing the downturn head-on. by turning entrepreneur.
You've had tens of millions of people lose their jobs instantly and had to, you know, in many cases, their job has kind of disappeared for a while, hopefully not permanently. But in some cases, like, you know, certain kinds of retail, leisure, hospitality, live entertainment, their job is gone until, you know, we get the pandemic under control. So they've had to figure out ways of reinventing themselves.
We'll hear more from economics reporter Gwen Guilford and a 26-year-old new business owner in Wisconsin.
How many new business applications have been filed during the pandemic so far?
That's after the break.
Hundreds of thousands of small businesses across the country have been forced to close in recent months, and millions of people have lost their jobs. But what looks like an economic disaster seems to have become fertile ground for young entrepreneurs who are seeking the opportunity to take the risk and open their own shops. Economics reporter Gwen Guilford has been talking to some of them. So, Gwen, you know, entrepreneurs start new businesses all the time, but what kind of numbers are we talking about for this year so far?
So far this year, there have been 3.2 million applications for employer ID numbers, and that's what you have to do to start a new business. And that's up from 2.7 million at the same period in 2019. And when you look at businesses that are likely to become employers in the future, that's 1.1 million. And that's up 12% from the same period last year. And it's getting it's not quite at levels that we were at before the Great Recession, but it's higher that that 1.1 million is higher than we've seen in more than a decade.
Now, how has the cycle of closing and reopening of cities around the country made it a good time for startup businesses?
It's really hard to tell what exactly is going on because we don't have good real-time data on the scale of business closures. However, we know enough to know that it's huge. More businesses have closed in the first three months of the crisis than you usually have in an entire year. And, you know, it's not like the recovery has picked up that much. We're on track to have a really just colossal scale of failures this year. And while that's devastating for local economies and it's wiped out tens of millions of people jobs, it is probably creating space for new enterprises to fill the void. So that could be part of why we're seeing a surge in new business creation. Another aspect is that part of the reason businesses are struggling so much right now, existing businesses, is that the pandemic has changed the way we do business in so many industries.
Why might business closures create opportunities for new startups?
And that may be creating an opportunity for new entrants to sort of disrupt and upset unseat established firms that are changing their ways too slowly to keep up. So in some industries, like maybe retail, where things are changing really fast, that could be a factor helping drive new business creation also.
And new businesses like these are vital to the labor market.
Yeah, so the economists look to the new business creation number as a leading indicator of, you know, a lot of economic conditions more generally, but also, you know, future labor market demand. And that's because most businesses, more than half of new businesses fail within five years. And those that don't, most of them remain pretty small. But those that are the exceptions, you know, that small minority grow extremely fast. And so and those are really important engines of new jobs created. And they account when new businesses create account for about 20 percent of new jobs created. And then when you factor in young businesses that have maybe started in the last few years, it's getting close to half of the new jobs that are created each year.
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Chapters
6 chapters
1
What is the main topic discussed in this episode?
0:05–0:53
2
How many new business applications have been filed during the pandemic so far?
0:53–3:07
3
Why might business closures create opportunities for new startups?
3:07–5:27
4
How could pandemic-driven industry changes enable new entrants to disrupt established firms?
5:27–7:39
5
Why do economists view new-business creation as a leading indicator for the labor market?
7:39–10:00
6
How have higher savings and housing-market gains helped fuel entrepreneurship in 2020?
10:00–10:54
Speakers
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