New Business Formation Is Surging–Again
New data shows a sustained surge in U.S. business formation, with applications to start new businesses remaining well above pre-pandemic levels. The increase suggests renewed economic dynamism after years of declining entrepreneurship rates.
Background
- This post is by economist Tyler Cowen, who writes the popular economics blog Marginal Revolution. The tone is data-driven and contrarian; Cowen often argues against pessimistic narratives about the US economy.
- The post reports that new business applications in the US are at record highs, continuing a surge that began during the pandemic. This is notable because for decades prior, business dynamism (the rate at which new firms are created and old ones fail) had been declining.
- The data comes from the US Census Bureau's Business Formation Statistics (BFS), a widely cited source that tracks applications for Employer Identification Numbers.
- Cowen makes a subtle point: the new firms tend to be smaller (non-employer businesses) and more tech-enabled, meaning GDP or employment measures may understate the shift. This contrasts with the traditional view that new business formation automatically boosts measured productivity.
- Understanding this helps explain ongoing debates about whether the US economy is becoming less dynamic or is simply changing form—from large industrial firms to small, solo, or gig-economy operations.