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Even Through The Pain Of 2020, Americans Are Starting A Record-Breaking Number Of New Businesses

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Hanna Panreck Contributor
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Despite economic hardship during the coronavirus pandemic, Americans still managed to start a record number of new businesses.

Americans are starting more new businesses at the fastest rate in more than 10 years, according to government data reported by the Wall Street Journal (WSJ). The pandemic struck a major blow to the economy but has also seemed to increase demand in some areas and open up new entrepreneurial opportunities.

Employer identification number applications, which are needed to start new businesses, have surpassed 3.2 million as of Sept. 26, according to the WSJ — compared to 2.7 million at that point in time in 2019. (RELATED: How Has Coronavirus Impacted America’s Small Businesses? Here’s What The Data Says)

“This pandemic is actually inducing a surge in employer business startups that takes us back to the days before the decline in the Great Recession,” John Haltiwanger, an economist at the University of Maryland, told the WSJ.

Portrait of happy woman standing at doorway of her store. (Rido/Shutterstock)

Haltiwanger also noted that many of these new businesses might fail.

“I think most entrepreneurs realize the probability of success is not high,” Haltiwanger told the WSJ. “The question is: Are they jumping on market opportunities that have emerged rapidly given the current environment?”

The U.S. lost more businesses during the first three months of the pandemic than the country usually loses in a year, George Washington University economist Steve Hamilton told the WSJ. Economists projected that 2% of small businesses would close permanently because of the coronavirus pandemic, according to the Washington Post.

When cities and states began lifting restrictions months ago as COVID-19 cases began to decrease, spending increased as many people resumed activities and consumption habits that were paused due to shutdowns, according to the WSJ.

In addition, applications to start businesses increased nearly 40% the week of Oct. 3 compared to the same week a year ago, CNN reported.

Joseph Brusuelas, chief economist as RSM US, told CNN that it’s important that displaced workers want to take advantage of low interest rates and start new businesses during tough times. “This has been one of the primary catalysts of resilience of the US economy throughout its history,” said.

New business applications did not increase after the economy tanked in 2008, according to CNN Business. Brusuelas noted that this was a sign an economic resurgence was not going as planned.

“One of the mistakes we made in the last crisis is we didn’t create the conditions for people to move toward the formation of businesses,” Brusuelas said, CNN reported.

He also noted that remote working has created a lot of new opportunities and that Americans’ ability to inexpensively borrow is helping those who do want to take financial risks and start a new business.

NEW YORK, NEW YORK – DEC. 09: An empty restaurant stands in Brooklyn on December 09, 2020 in New York City. New York’s governor, Andrew Cuomo, is threatening to close indoor dining as soon as this Monday if hospitalization rates continue to increase in New York City. Currently, there are over 4,800 COVID-19 patients are now hospitalized statewide, which is double the amount reported on Nov. 18 and the highest number of hospitalizations since May 22. Restaurants in New York City, one of the most important business sectors, are already closing at alarming rates due to various health restrictions, a lack of tourism and the disappearance of business clients. (Photo by Spencer Platt/Getty Images)

Goldman Sachs noted that the increase in applications might have to do with the many applications that were put off during nationwide lockdowns, CNN reported, but that “the data suggest a much more positive outlook for new business formation than after the last recession.” (RELATED: Goldman Sachs Sees Small Business Rebound After Lockdowns)

Madison Schnieder, 22, opened Lela’s Bakery Haviland, Kansas, in September. She said that her business has been busy since the day she opened the doors, according to the WSJ.

Schnieder recently graduated college and said she reached out to the previous owner of her shop about purchasing the place, but it was out of her price range. However, the owner allowed her to rent the place for $350 a month, according to the WSJ.

The 22-year-old bakery owner took $8,000 from her savings to put towards startup costs and told the WSJ she received a lot of help from locals.

“It all happened very quickly and was really crazy,” Schneider said.

Danielle Payton, who watched her publicist business suffer as fitness centers and gyms had to abide by the lockdown orders and shut down temporarily, started Kuudose, an online fitness class platform, according to the Wall Street Journal.

While gyms were shut down, Payton noticed several places were offering free online fitness classes, which she thought was unfair to the businesses. “They were giving away their livelihood,” she said, according to the WSJ. “Free is not sustainable. Our haircuts aren’t free, our rent isn’t free … Nothing is free.”

“Fitness should be affordable and accessible to all, but everyone needs to make a living,” she said. Kuudose trainers make a monthly commission for the people they bring to the platform, the WSJ reported.