Despite the global economic crisis, the rate of new business creation continues to surge. The United States is on pace to break its record for new business applications in 2022, according to the US Census Bureau. This figure represents an increase of 20 percent from the previous year, and is particularly strong for entrepreneurs of color.

New businesses start up when people have an idea for a product or service that meets changing consumer needs. Entrepreneurs often take advantage of a variety of resources to get their ideas off the ground. In the United States, many new businesses plan to hire employees. However, self-employment is a viable option for people to make ends meet.

Several regulatory reforms have removed barriers to entry for new entrepreneurs. As such, the number of new businesses that survive their first year is significantly higher than the popular myth that a half of all new companies fail in their first year. Some analysts credit part of the increase to people who lost their jobs during the pandemic. Nonetheless, it remains unclear how much of the uptick in applications reflects the impact of the pandemic or whether it is just a reversal of the overall trend.

Data from the US Census Bureau suggest that the rate of new business applications in Q1 2020 is 62.1 percent higher than in Q1 2019. These numbers are expected to rise to 910,704 in Q2 and 1.48 million in Q3 2020. While these numbers are slightly higher than the previous two quarters, they are still well below the record high of 5.4 million in Q1 2020.

Compared to the previous five years, the average number of new businesses was 4.4 million. There is a wide range of these figures, and some are based on surveys. It takes time for new businesses to appear in surveys. Despite the slow economic recovery, the number of new businesses is on track to set another record in 2023.

Business creation is a significant source of job creation. According to the Kauffman Foundation, college graduates experienced a 48% increase in the rate of entrepreneurship in the past decade. More African American entrepreneurs began a new business in 2022 than in any other year.

The most recent survey data suggest that the rate of new business creation is likely to continue to rise, and that the increase will be largely driven by entrepreneurship. Research shows that the supply of venture capital (VC) has helped nascent entrepreneurs overcome monetary costs. The VC effect is robust to controlling for other standard determinants of new business creation.

New business formation is not only a powerful source of job creation, but it is also an important contributor to productivity growth. If businesses can be created faster, they may add a boost to the overall labor market recovery. But how to improve the conditions for business owners is a challenge that policymakers face.

A variety of research projects are tracking entrepreneurship rates in different countries. Some are longitudinal studies of business start-ups that follow the development of new firms. Other projects, such as the Panel Studies of Entrepreneurial Dynamics, identify representative samples of businesses and track their progress. Using a variety of indicators, the Panel Studies of Entrepreneurial Dynamics measure the effect of a range of factors on new business creation, including the regulatory environment and the supply of venture capital. Among the countries examined are advanced Anglo nations (United States, Canada, and Australia), as well as developing nations (China, Brazil).