Entrepreneurs thrive in pandemic that was supposed to crush them

It was supposed to crush small businesses. Instead, the pandemic seems to have incubated them in the U.S.

The number of business locations increased in almost three-quarters of U.S. counties over the two years through September 2021, according to new research from the Economic Innovation Group, a Washington think tank. The fastest growth was in the Southeast of the country and inland western regions.

To be sure, plenty of U.S. businesses have suffered in the pandemic, and many were forced to shut down. Still, in the aggregate they proved resilient — helped by a combination of direct government support for companies, and aid to households that propped up demand for goods and services, according to the EIG report.

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“During the early months of the COVID-19 pandemic, fears of a massive wave of small business failures were pervasive,” wrote Connor O’Brien, a research and policy associate at the group. “These fears failed to materialize.”

In some parts of the country, especially older cities in the Northeast and upper Midwest, the numbers are less upbeat. New York City, Baltimore and Detroit are among metro areas that saw a net decline in business establishments over the period.

The worst performer of all, at the county level, was Manhattan. Between the end of 2019 and the third quarter of 2021 it lost more than 5,300 businesses — including almost 500 financial firms, some of which decamped for Florida, and 400 full-service restaurants.

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In the EIG report, professional and technical services were among the top areas for expansion, accounting for 23% of the net increase in business numbers nationwide. Freight trucking also grew rapidly, especially in counties that are traditional hubs, according to the analysis, which was based on the latest quarterly census of employment and wages carried out by the Bureau of Labor Statistics.

Some of the COVID-era entrepreneurship may have been born of necessity, as people who lost their job in the initial wave of lockdowns set up their own businesses in an effort to make ends meet.

Another driver was the great migration spurred by the boom in remote work. Ada County in Idaho, for example — home of the city of Boise, which had some of the fastest population growth in the pandemic — saw a 23% increase in business establishments, with inflows boosting demand for services from real-estate agents to home refurbishers.

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Similar trends were evident in places like Salt Lake County, Utah, and Broward county and Palm Beach in Florida.

The aging American population has been another driver of business formation. Support services for the elderly and disabled added almost 100,000 establishments, or 13% of growth, the EIG study found.