One second-order effect of the pandemic which I’ve heard talked about less than I’d expect:
This is the best proxy I found on FRED for new businesses founded in the US, by week. There was a mild upward trend over the last few years, it’s really taken off lately. Not sure how much of this is kids who would otherwise be in college, people starting side gigs while working from home, people quitting their jobs and starting their own businesses so they can look after the kids, extra slack from stimulus checks, people losing their old jobs en masse but still having enough savings to start a business, …
For the stagnation-hypothesis folks who lament relatively low rates of entrepreneurship today, this should probably be a big deal.
How sure are you that the composition is interesting? How many of these are just quick mask-makers or sanitizer-makers, or just replacing restaurants that have now gone out of business? (ie very low-value-added companies, of the ‘making fast food in a stall in a Third World country’ sort of ‘startup’, which make essentially no or negative long-term contributions).
Good question. I haven’t seen particularly detailed data on these on FRED, but they do have separate series for “high propensity” business applications (businesses they think are likely to hire employees), business applications with planned wages, and business applications from corporations, as well as series for each state. The spike is smaller for planned wages, and nonexistent for corporations, so the new businesses are probably mostly single proprietors or partnerships. Other than that, I don’t know what the breakdown looks like across industries.
How do you feel about this claim now? I haven’t noticed a whole lot of innovation coming from all these small businesses, and a lot of them seem like they were likely just vehicles for the extraordinary extent of fraud as the results from all the investigations & analyses come in.
… so it’s presumably also not just the result of pandemic giveaway fraud, unless that fraud is ongoing.
Presumably the thing to check here would be TFP, but Fred’s US TFP series currently only goes to end of 2019, so apparently we’re still waiting on that one? Either that or I’m looking at the wrong series.
One second-order effect of the pandemic which I’ve heard talked about less than I’d expect:
This is the best proxy I found on FRED for new businesses founded in the US, by week. There was a mild upward trend over the last few years, it’s really taken off lately. Not sure how much of this is kids who would otherwise be in college, people starting side gigs while working from home, people quitting their jobs and starting their own businesses so they can look after the kids, extra slack from stimulus checks, people losing their old jobs en masse but still having enough savings to start a business, …
For the stagnation-hypothesis folks who lament relatively low rates of entrepreneurship today, this should probably be a big deal.
How sure are you that the composition is interesting? How many of these are just quick mask-makers or sanitizer-makers, or just replacing restaurants that have now gone out of business? (ie very low-value-added companies, of the ‘making fast food in a stall in a Third World country’ sort of ‘startup’, which make essentially no or negative long-term contributions).
Good question. I haven’t seen particularly detailed data on these on FRED, but they do have separate series for “high propensity” business applications (businesses they think are likely to hire employees), business applications with planned wages, and business applications from corporations, as well as series for each state. The spike is smaller for planned wages, and nonexistent for corporations, so the new businesses are probably mostly single proprietors or partnerships. Other than that, I don’t know what the breakdown looks like across industries.
How do you feel about this claim now? I haven’t noticed a whole lot of innovation coming from all these small businesses, and a lot of them seem like they were likely just vehicles for the extraordinary extent of fraud as the results from all the investigations & analyses come in.
Well, it wasn’t just a temporary bump:
… so it’s presumably also not just the result of pandemic giveaway fraud, unless that fraud is ongoing.
Presumably the thing to check here would be TFP, but Fred’s US TFP series currently only goes to end of 2019, so apparently we’re still waiting on that one? Either that or I’m looking at the wrong series.
Somebody should post this on Paul Graham’s twitter. He would be very interested in it (I can’t): https://mobile.twitter.com/paulg