U.S. Business Starts Enjoyed Their Best Year Ever Amid Covid-19

The surge of U.S. business formations in the back half of 2020 has been one of the pandemic’s many surprises.

After cratering by 30% in the weeks following the March lockdowns, paperwork filed by prospective businesses started growing in June and finished the year ahead of 2019’s tally by almost a quarter, according to a U.S. Census Bureau analysis of federal tax documents.

It was the highest annual total on record, according to John Haltiwanger, an economist at the University of Maryland.

The upswing in entrepreneurship comes against the backdrop of mass closures of established small businesses as the coronavirus lockdowns shuttered shops and kept people at home. The National Restaurant Association estimates that 17% of U.S. restaurants -- or about 110,000 establishments -- have closed either permanently or for the long term.

At the same time the pandemic has accelerated the shift toward online shopping. About a third of the increase in new business applications comes from those planning online and other “non-store” retailers, reflecting how people can build a website and start selling in a matter of days. The phenomenon is providing a lifeline for people when the national unemployment rate, at 6.7%, has almost doubled from February.

In the suburbs of north Atlanta, Doug McCue turned his passion for roasting coffee beans into e-tailer CueBrew Coffee Roasters in May when he couldn’t land full-time work after moving from New York in 2019. For now, he’s only making 10% of what he earned working in luxury retailing, although his business is building.

“At the beginning, it took some courage to say, ‘OK, this is what I’m going to be doing,’ versus, ‘Let me fall back to what I’ve done before,’” McCue said.