The pandemic is expected to change the labor market, with more work from home and higher wages. But one unexpected change is the large increase in new business applications. The figure below from the Census shows a large pandemic increase.
The increase is unusual; nothing like it happened during the last recession. Most of the new applications are for individual proprietors who probably won't hire other people, as opposed to high impact businesses that create many jobs. Most of the new applications were professional and technical services, food and retail businesses. Last spring there was speculation people were forming businesses because of a bad labor market. But as of June, new applications are still up, even as jobs are unfilled and wages are up. It could represent that the new work from home regime offers more opportunities for contract work, a desire for more flexibility because of childcare needs, or perhaps a welcome return of more dynamism to the U.S. economy.
Allison Schrager is a senior fellow at the Manhattan Institute. Follow her on Twitter here.
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