Number of startups surges amid pandemic

Americans in 2020 filed paperwork to start 4.3 million businesses

The coronavirus pandemic appears to have unleashed a tidal wave of entrepreneurial activity, breaking the United States out of a decadeslong startup slump.

Americans filed paperwork to start 4.3 million businesses last year, according to data from the Census Bureau, a 24 percent increase from the year before and the most in the decade and a half that the government has kept track. Applications are on a pace to be even higher this year.

The surge is a striking and unexpected turnaround after a 40-year decline in U.S. entrepreneurship. In 1980, 12 percent of employers were new businesses. By 2018, the most recent year for which data is available, that share had fallen to 8 percent.

The prolonged decline worried economists, because startups are a key source of job growth, innovation and economic resiliency. A reversal of the trend could contribute to a more dynamic, productive economy that could more easily rebound from future recessions.

“The pandemic forced a big realignment that we never would have seen otherwise,” said John Lettieri, president and CEO of the Economic Innovation Group, a Washington research organization. “What I hope is that this was the definitive moment where the sclerosis broke.”

It is too soon to declare that the slump is over. The Census Bureau tracks business applications by the week, but not all applications turn into real-world businesses or result in hiring. Data on actual business formation will not be available for several years. And it could fade quickly as the economy reopens and people who started businesses in the pandemic return to more traditional forms of employment.