A smiling person with dark, curly hair stands behind a window and hangs a small sign that bears the word "OPEN." The room behind the person is obscured by a reflection in the window, which shows a building across the street.
Retail is one of the industries that saw an increase in newly registered businesses during the pandemic, and these businesses are expected to continue to grow. — Getty Images/Luis Alvarez

While the pandemic was difficult for most business owners, some entrepreneurs seized the opportunity to start new ventures. According to data from the U.S. Census Bureau, over 4.3 million new business applications were filed in 2020, an increase of 24% over 2019.

That trend continues in 2022. The latest report released in August 2022 shows that the rise in new businesses hasn’t slowed, despite fears of a recession, inflation, and general economic uncertainty. July 2022 saw new businesses increase by 3.1% compared to June 2022. Here are some key insights the Census Bureau report and other industry experts revealed about the environment for post-pandemic startups.

Which industries saw the greatest growth?

The U.S. Census Bureau tracks new business applications according to their assigned North American Industry Classification System (NAICS) code. The NAICS code broadly identifies the industry in which the new business will compete for market share.

[Read more: Open for Business: What You Need to Know About the Pandemic Startup Wave]

New businesses are cropping up in some industries more than others. Retail, transportation and warehousing, and administrative support are among the markets where most founders seem to be registering new ventures. Drilling down to data from the last month, construction, wholesale trade, and administrative and support were the industries in which the highest business growth occurred, at +9.6%, +7.4%, and +6.5%, respectively.

Online microbusinesses continue to grow

In 2018, GoDaddy started an initiative called Venture Forward to track the development of online microbusinesses (defined as businesses with 10 employees or fewer) following the pandemic. The initiative's study found that Americans found that nearly 17% of the 20 million microbusinesses tracked in the United States were started after the onset of the pandemic.

The Census Bureau report potentially leaves out these microbusinesses; government metrics don’t track online microbusinesses separately. And less than 20% of those surveyed by Venture Forward have registered an EIN. As a result, these businesses are largely invisible to policymakers.

Diving into data about these smaller e-commerce ventures provides another window into which markets are growing post-pandemic. In the Venture Forward August 2022 report, online businesses showed strong growth among industries that require in-person interactions. Consulting (205%), travel (88%), events (76%), and entertainment (66%) all experienced huge gains in average revenue growth per entrepreneur.

[Read more: How Hot Startups Pacaso, Shipt and Thumbtack Capitalized on Two Key Pandemic Trends to Fuel Growth]

Despite alarming news headlines, most experts agree that the economy is not in a recession and that many of the challenges faced by businesses are resolving.

Many new businesses plan to grow

The Census Bureau breaks down new business applications into a few subcategories, one of which is “Business Applications with Planned Wages (WBA).” These High-Propensity Business Applications indicate a first wages-paid date on the IRS Form SS-4 — an indicator that the business has a high likelihood of transitioning into a business with payroll.

Businesses with planned wages experienced the highest growth during this period at +4.6%. This is great news for the employment market, and it squares with research from Venture Forward and the UCLA Anderson Forecast Microbusiness Activity Index (MAI).

The MAI is a data-driven analysis regarding the formation, growth, and dynamics of online microbusinesses. For each additional 1-unit increase in MAI, there’s a 0.1 percentage point decline in the unemployment rate, showing that online microbusinesses are supporting the labor market alongside business applications with planned wages.

Tracking future startup trends

Despite alarming news headlines, most experts agree that the economy is not in a recession and that many of the challenges faced by businesses are resolving. “While it’s not over, the period of maximum stress is likely behind us. Demand is cooling. Inventories have been rebuilding healthily. Workers are returning to the labor force,” wrote Harvard Business Review.

While that’s great news for existing businesses, it could also lead to a slowdown of new startups. Companies like Shipt were created to respond to a specific pandemic-induced need. As consumer needs and buying trends change, it will be interesting to see where entrepreneurs and investors focus their efforts in starting new businesses.

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Published August 30, 2022