Details on establishment formation from yesterday’s Quarterly Census of Employment and Wages show an acceleration beginning in 2020Q3, accompanied by a drop-off in the number of employees per establishment. As the graphs below show, between 2017 and 2019 average establishment growth ran at 1.7%, and from 2020Q3 onward at 3.8%, while the number of employees per establishment slipped from 14.5 to 13.2.
And a new term is born: the solopreneur.
Another take on this comes from applications for new businesses. Census statistics show they stumbled in March and April of 2020, and quickly recovered, rising from 3.5 million in 2019, to 4.4 million in 2020, and 5.4 million in 2021, a 54% increase over two years.
Venture Forward, a collaboration among GoDaddy and several universities to learn more about new business formations, estimates there are 45 million microbusinesses in the US, of which 90% have fewer than 10 employees. Many of these have been formed out of necessity, and 63% of those formed since March 2020 required less than $5,000.00 in funding.
The Kauffman Foundation reports that in 2020 the share of opportunity entrepreneurs, those who were not unemployed when they started a new business, fell from 87% in 2019 to 70% in 2020, and then rose to 81% in 2021, so that clouds the picture a bit. But small and growing businesses are drivers of employment, and it’s very good news that new businesses formed by blacks rose from 15% before March 2020, to 26% through July 2021, by women from 48% to 57%, and by those without a college degree from 36% to 44%. The share started by whites slipping from 70% to 60%.
National Bureau of Economic Research found that zip codes with higher numbers of black residents, especially with higher median incomes, were associated with higher startup rates. UC Santa Cruz’s Robert Farlie reported that between 2020Q1 and 2021Q3 black male business ownership rose by 33%, the largest by demographic, followed by a 22% increase among black female entrepreneurs.
The Harvard Business Review recently reported that 17% of black women were in the process of starting a business, compared to 10% of white women, and 15% of white men.
