Business Startups Surging, Probably Not Why You Think

Many of these new startups are sole proprietorships and are likely to stay this way. While small firms are significant, the crucial ones for economic growth are companies that hire multiple employees. Applications for businesses likely to hire multiple employees are up 15.5% from 2019 and more than 20% higher than the average for the previous decade.

The rise is taking place across the board – representing all kinds of industries, from home-based companies flying almost under the radar to firms aiming to make a big splash. This is great news for the economy and explains in part why forecasters have been increasing their projections for economic growth this year.

Unfortunately, not all the news is good. The pandemic has not been kind to working women. Women have an inordinately large footprint in retail and service, which were harder hit last year. And working mothers typically have had to shoulder more child care and education responsibilities than men during the pandemic.

While the number of female entrepreneurs jumped last year, according to the Kauffman Foundation, it was not enough to overcome the long-standing gap with male entrepreneurs, whose numbers also jumped even more last year.

Between February and April last year, 3.5 million adult women left the labor force and despite a growing number of jobs, two-thirds of them have yet to return. That workforce erosion has been significantly greater for women than for men.

Black entrepreneurship, on the other hand, is a different story. After lagging other racial and ethnic groups for the past quarter-century, the share of entrepreneurs within the African American community jumped last year to the level of white Americans for the first time, the Kauffman Foundation found. Latinos continued to outpace both of those groups, as well as Asians.

The bottom line is, we welcome increases in entrepreneurship and new business startups for whatever reasons they occur. In this case, though, we need to be aware that this surge in growth is driven in large part because so many Americans lost their jobs last year and have had little choice in many cases but to start their own new ventures.

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