Did People Use their Stimulus to Start a Business? The Spike in New Businesses, one of the Mindblowers of the Pandemic

Now it’s confirmed, it wasn’t for PPP-loan fraud.

By Wolf Richter for WOLF STREET.

One of the many economic mindblowers during the pandemic was the spike in new business formations, based on applications for Employer Identification Numbers (EIN) with the IRS. They exploded in July last year, then zigzagged up and down, and in May, hit the second highest ever. Throughout, there were suspicions that business applications were spiking because fraudsters were creating businesses to obtain PPP loans – though an EIN wasn’t even required for PPP loans. The PPP ended in May. And today, we got the business applications for June.

In June, 448,533 EIN applications were filed with the IRS, the seventh highest in the data and up 56% from June 2019, according to the Census Bureau today. In the first half of this year, 2.81 million such applications were filed, up by 61% from the first half in 2019.

This may shed more light on the phenomenon that people, flush with stimulus money and income from unemployment compensation and stock market gains, are striking out on their own – which would be a great thing. And it may also shed some light from a different angle on the unemployment situation and the difficulties companies have in hiring workers.

The EIN is for businesses what the Social Security number is for individual taxpayers. Excluded are EIN applications that are unrelated to typical business formations, such for tax liens, estates, trusts, etc.

Most startups will create only a job for the owner and maybe a few others. And that’s great. Those types of small potentially exciting businesses – such as the WOLF STREET media mogul empire before you – hire all kinds of other businesses or people on a contract basis, from accounting to IT support. They just don’t add many employees. But there are other startups that do have the potential to create lots of jobs, though their number is a lot smaller.

The potential job creators.

Based on the information in the EIN application, the Census Bureau identified businesses that have a “high propensity” of creating a significant payroll – the “High-Propensity Business Applications” (HBA).

In June, 152,272 businesses filed applications deemed to be HBAs, up 39% from June 2019. In the first half this year, 955,121 businesses filed these types of applications, up 45% from the first half in 2019:

The real potential job creators.

Within the group of HBAs is the subgroup of “Business Applications with Planned Wages” (WBA) by businesses that already have a planned date for paying wages. They have funding, they have hired people, and they’re ready to pay wages. They’re deemed to be most likely to grow their payroll and become significant employers.

In June, 52,325 WBAs were filed, up 31% from June 2019. In the first half this year, 329,414 of these types of business applications were filed, up 36% from the first half in 2019.

But even that spike in July last year was still down about 30% from the levels that prevailed before the Financial Crisis. In the years between 2013 and 2019, the number of WBAs was down by nearly half from the pre-Financial Crisis levels. These real potential job creators, despite the surge, have remained scarce since the Financial Crisis:

Mostly businesses with a low propensity to create jobs.

Total business applications minus the “High-Propensity Business Applications” leaves us with the remainder, what I term the low-propensity business applications (red line in the chart below). They might only employ the owner and someday a few other people, but many remain one-man or one-woman shows.

And that’s a great way to go. But the failure rates are very high. In many cases, the owners quietly throw in the towel, shut down the business whose losses they’d funded on their credit cards, and either start up another business or get a job.

Applications for these types of businesses began to surged during the Financial Crisis and continued to rise – even as the other types of applications declined or remained flat – and nearly doubled from the year 2007 (1.1 million) to the year 2019 (2.2 million). And then came the huge spike in mid-2020, when millions of people got laid off and were flush with cash to strike out and start something new.

By contrast, in June, the HBAs had barely recovered to 2007 levels, after years of drought (purple line); and the WBAs never hit those 2007 levels again, not even during the spike last July (green line):

What types of businesses are they?

Retail trade dominates. Brick-and-mortar retail businesses have long been under siege from ecommerce, and then took a brutal beating during the pandemic. Over the years, tens of thousands of stores were shuttered, from Sears stores down to small shops, and numerous malls turned into zombie malls. And the pandemic accelerated that process. Yet, entrepreneurs never gave up on retail, they just did it online. They can run an operation out of their garage and ride the historic boom of ecommerce during the pandemic.

In June, 81,351 businesses filed applications listing the NAICS (North American Industry Classification System) code for retail trade businesses. This was up by 86% from June 2019.

In the first half, 543,468 such applications were filed, up by 110% from the first half in 2019. Nothing else comes close (red line below).

Retail trade business applications used to run roughly on the same level as, or below, professional services applications (green line) but during the Pandemic just exploded higher.

The top seven industries, by number of business applications in June, and the % increase from June 2019:

  • Retail (red): 81,352, +87%.
  • Professionally services (light blue): 52,087, +37%.
  • Transportation & warehousing (green): 41,812, +110% related to the delivery requirements of the ecommerce boom.
  • Construction (black): 39,709, +30%.
  • Administration and support (yellow): 32,624, +62%
  • Accommodation and food services (gray): 26,783, +73%
  • Health Care and Social Assistance (brown): 25,445, +31%

Eager entrepreneurs in the waiting…

A recent LendingTree survey found that 70% of Americans would rather work for themselves, than for someone else. Among millennials, 77% would rather work for themselves. That is a huge pool of people that might someday be dreaming about starting their own business.

And 37% of millennials thought about starting their own business last year, followed by Gen Zers (30%) and Gen Xers (25%). Boomers not so much (7%).

The survey also found that 82% of these prospective entrepreneurs would take a pay cut for a year as they worked on their business.

The stimulus and extra unemployment payments during the pandemic may have made it possible for entrepreneurs to get their ducks all lined up in a row, and put their businesses together, while still getting some cash flow to cover their household expenses. And those creative juices are a good thing.

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  116 comments for “Did People Use their Stimulus to Start a Business? The Spike in New Businesses, one of the Mindblowers of the Pandemic

  1. MiTurn says:

    As many of these new entrepreneurs are retail startups, they have to store product. A few Wolf Street posts ago I wondered why so many new storage unit parks are going up. I thought middle-class hoarding. Petunia suggested retail startups using storage units to store product. Any of you Wolfstreeters personally know anyone doing this — using storage units to store product?

    • Wolf Richter says:

      The new retail model is that you don’t store the product. You have the product direct-shipped from the warehouse or manufacturer to your customer.

      Obviously, if you’re selling a product that you’re making, then you do everything, from manufacturing to storage and shipping.

      • Wolf, that is how I ran my bullion business for over 20 years: direct shipping from my distributors. Why handle a heavy product twice with addtional shipping costs, why have to hedge the position until it is paid for, and why have to risk theft with a valuable inventory on your premises??? I was a bullion broker, not a dealer that carried an inventory. The business model works great for many products.

        And my sole marketing avenue was the internet, a very friendly place until the Supreme Court in June, 2018 granted permission for all States to tax all sales on the internet. Closed business in December, 2018.

      • MiTurn says:

        Viz. storage units, we’re back to middle-class hoarding? Maybe boomers are downsizing their dwellings, but still can’t give up the lifetime accumulation of stuff?

        • Harrold says:

          Houses have been packed full of possessions and people are loath to let anything go.

      • Mad Puppy says:

        My daughter started a new/used children’s clothing store up north out of her home a few years ago, partly to stay home with her children and partly because she saw a need for good inexpensive clothing in underserved areas. She has organically grown it to a real store with employees. She has two storage units in the town for out-of-season goods which are more readily found at an inexpensive price, and is planning on a storage container at this end for the same reason. Of course, she has had the MPGWU (mom and pop garmet workers union) working for free to help her get rolling. It has kept us busy in retirement. This type of business only works in communities without the big thrift stores. She and her husband have won an award as the best new business in her area, and I am very proud of their efforts.

        • The biggest new business in my area is personal storage. Right across the street is a new condo project. Dovetails nicely. Goods are like monetary excess, very difficult to mop up. The thrift stores are booming, they refuse pickup donations, they still take anything if you drop it off. We are clearly in a business downcycle, overcapacity, and that makes sense. Could you cut costs by self warehousing?

      • georgist says:

        While it is encouraging to see lots of business starts, it seems like a lot of the comments are about middle men. Someone else manufactures, they import, skim, and sell.

        This activity alone is not going to lead to a strong recovery.

        • Dan says:

          I disagree. Getting goods delivered to whoever needs them most (and pays for them) is a crucial component of the economy.

    • Old School says:

      Saw a lawyer on internet saying everyone needed to have business for the tax breaks. Whether true or not some people may do it for that reason.

      • Wolf Richter says:

        Yes, that’s true. Our tax code is incredibly unfair. But that business has to have real revenues after a while, or the IRS will rip you apart. So a fake business works for a little while (considered the startup phase), and then, if you don’t report revenues, you get rolled up.

        • Darlene says:

          Why don’t people just incorporate themself?
          That way they can copyright all their personal data, make it available for use by others at say $100 for every second and third party use.

          Also, like a business writing off advertising, they could write off the cost of all clothing, makeup and personal ads, since those go toward “improving the business.”

          Granted, they would have to “show a profit” in 2 out of 3 years, and pay a minimum corporate income tax, which would be far lower than the writeoffs against real income.

          Also, income would have to be funneled to the corporation instead of the person. Here’s a few other rules to follow:
          Setting up a separate business checking account
          Keeping business and personal expenses separate
          Maintaining a good business record-keeping system
          Registering the business with a state as an LLC or partnership.
          Complying with other state and federal tax laws, including collecting sales taxes and paying annual state business renewal fees or franchise taxes.
          Having regular business hours or maintaining a business website.

        • Joe Saba says:

          I use LLC’s and setup with IRS as S corps
          mostly service related income, but I can deduct all EXPENSES
          btw NEVER TAKE home deduction – it’ll bite you when you sell and is BIG RED FLAG for IRS audit
          I do deduct portion of utilities I use.

        • Swamp Creature says:

          Joe Saba

          Same here. I’ve never taken the home office deduction for the reasons you outlined. Use about 1/4th of my home space for business.

    • Les says:

      A lot of them are new restaurants that had to hold off last year due to the pandemic. I also see announcements for new stores taking over vacancies in malls.

  2. 2banana says:

    It was massive fraud – all to get the free government pesos.

    Heck – There are articles of folks in prison becoming “new business” prospective entrepreneurs.

    “Based on the information in the EIN application, the Census Bureau identified businesses that have a “high propensity” of creating a significant payroll – the “High-Propensity Business Applications” (HBA).”

    • Wolf Richter says:


      Yeah, the PPP was loaded with fraud. But not the business applications. You did NOT need an EIN for a PPP loan. SS# was all you needed. Plus the PPP ended in May. The June EIN figures are completely free from that PPP suspicion, as I pointed out.

      • Tom S. says:

        But, you do need to prove the PPP went to payroll to get the loan forgiveness as I understand it.

        • Wolf Richter says:

          Your own salary or contract pay is good enough. Millions of independent contractors got PPP loans.

          Most people don’t realize just how vast the PPP loan program was. Just about anyone with some kind of independent work could get it.

        • Cas127 says:


          Excellent stats, as usual.

          But I think you might be a bit too sanguine about the surge in EINs (even leaving aside the possibility of fraud, which you make decent arguments against).

          Looking to the PPP stats again, prior existing businesses (including almost all of them, from solo shows to all but the handful of the largest) numbered somewhere in the neighborhood of five or six million.

          (Other stats reference much higher numbers – like 20 million plus – but PPP loan count results strongly suggest those numbers sweep in non-employment entities that only exist for tax or liability issues).

          Given that only five million businesses (including a huge pct of solo shows) existed pre-pandemic, it is hard to be optimistic about the large number of likely tiny startups occurring under the unemployment duress of the pandemic.

          Their owners are to be congratulated and encouraged for trying, but their efforts might be more from desperation than optimism.

          Getting a business to survive is very hard with a ton of pre planning…doing it off the cuff while under fire is much, much harder.

          If we had a less blindly crappy government/media, business survival structures might be rapidly put in place to even the odds.

          But we don’t live in that kind of country anymore, political power lust won’t allow for it – businesspeople (even small ones) are the designated villains for the MSM to use to deflect blame from our horrifically failed politicians.

  3. gorbachev says:

    Turns out people are not on their couches.
    So those folks who supported cutting
    unemployment checks for those in need
    look like goofs now.

    • gametv says:

      COVID allowed lots of people the freedom to get away from needing a paycheck, with the free money that was handed out. But most of these businesses are going to fail, or were just a pipe dream until the need for income forced them back into jobs.

      • Engin-ear says:

        I am glad to see this spike in business applications, that is a good sign in tough times.

        Can’t stop thinking about 2 points.

        Firstly about newly created WFH croud that is trying to monetize their new free time. They don’t spend time in transport any more and are possibly tempted to convert their employee idle time into productive time for themselves.

        Secondly the books I read lately about french (late 18th century) and german (early 20th century) fiat money inflations: the first phase of inflation brings spikes in retail and manufacturing.

        • Eternal Dissident says:


          Can you please share the title of the book about German hyperinflation? Also, what did you think of it?

      • Harrold says:

        A lot of now big companies were started during depressions.

        Hewlett Packard and Disney were started during the Great Depression.

        GE was founded during the Panic of 1873 and GM during the Panic of 1907.

        “In the middle of difficulty lies opportunity.”

        Albert Einstein

      • Heinz says:

        New business startups have a dismal success rate. According to Investopedia:

        “In 2019, the failure rate of startups was around 90%. Research concludes 21.5% of startups fail in the first year, 30% in the second year, 50% in the fifth year, and 70% in their 10th year.”

        I would venture to say the PPP was scammed by many ‘entrepreneurs’ who probably knew their business model was a pie-in-sky flop to start with but wanted to fleece the taxpayer for all they could while the getting was good.

        • PNW Greg says:

          “…the failure rate of startups was around 90%”
          I have seen this factoid repeated ad nauseum, but I have never been able to find out exactly what they count as “failure”. Is any business who doesn’t still have their doors open considered a “failure”? If someone decides, “Hey, that was fun, but I’d rather do something else.”, then shuts down their business, pays all their bills, and maybe even walks away with a profit, does that count as a “failure”?

        • Wolf Richter says:

          PNW Greg,

          I think people a conflating everything into one mystery number. The factoid that I remember is that 90% of RESTAURANTS close within five years of opening — and I’m not sure that’s a real number either — but it makes them the most failure-prone business out there, which is why this number is cited. For most businesses, the survival rates are much higher.

  4. MonkeyBusiness says:

    Destroy the monopolies first, otherwise these green shoots will just die.

    Hard to know whether Lina Khan is the real deal or not. The opposition against her is so united, it might be 4D chess i.e. the tech companies are angling for her to get elected.

    • K says:

      I am afraid that those green shoots are about to get hit by Hurricane Fed’s millions of “mistakes” that all “coincidentally” benefitted the banksters who “coinciden tally” own “Fed” by owning the district “Fed” banks through their ownership of local banks, and their cronies. Actually, it might be affect them less like a hurricane and more like an old, Tsar Bomba.

      Watch the latest PBS documentary on the “Fed.” It is not a complete whitewash like the laughable, PBS documentary on the 2008 bailouts that is now being distributed on the internet, by the billionaires’ council on their foreign relations, naturally.

      They actually allowed criticism, told the truth many times, and disclosed the “coincidental” fact that all of the actions of the “Fed” only benefit the billionaires (who own the “Fed”_ or their cronies NOT ordinary Americans. Of course, the fellow who appears to be a Lex Luthor clone that the “Fed” had created (who I will call “Lex 2”) denies that the billionaires’ dear “Fed” did anything wrong.

      Suuuuuuure, I believe him. If you all also believe him, we should have all Americans’ water rigorously tested.

      Whatever Lex 2 claims, the PBS program does discuss how in 2020 the pandemic made the public want cash– NOW. That led to a stock market fumble by the wonderful “Fed.” It is good that every single American is vaccinated now, with no exceptions, because if that were not true in any state, then the same might happen if lots of people started getting infected in any state with a worse variant so hospitals got overwhelmed this winter. Thank god that cannot happen because the consequences for the stock market would have been dire.

      The 15 billionaires who own US media per Forbes Magazine, and apparently, share with other billionaires control of our government, apparently have actually allowed in this PBS documentary some mild but loving criticism of their precious golden goose: their “Federal” Reserve. The synopsis is that it is a wonderful, lovable, golden goose with TRULY the purest of hearts and intentions that by sheer “coincidence” always lays golden eggs for the banksters and Wall Streeters in the form of bail outs and NOTHING for the rest of Americans. (The “Fed” truly believes in trickle down economics which has the same effect for ordinary Americans as standing too close to a drunk fellow at a urinal.)

      However, now, it is implied that their dear “Fed” may have adorably blown up the bubbles too big. Thus, as wonderful and precious a golden goose as the “Fed” is for the banksters and Wall Street billionaires, they might let it take a smidgeon of the blame for the coming financial catastrophe when all of the gigantic, financial bubbles that their beautiful, beloved “Federal” Reserve adorably blew up for their profit suddenly pop.

      After all, they cannot let ordinary Americans blame them for corrupting it and the US government, can they? Aside from Jeremy Grantham, who must be truly annoying to the banksters with his nasty habit of always telling the truth, even some other persons connected with what cynics have called some of the most evil institutions on the planet agree with the gentle criticism of their precious “Fed” and dire predictions.

      Clearly, the billionaires need to get talking heads out “prophetically” predicting the coming disaster ready in case Americans do not allow Lex 2 to be their (puppet) Moses to lead them out of the next financial catastrophe which their adorable “Fed” causes. I did like the comments of Jeremy Grantham: he actually pointed out the financial industry as being a blood sucker. It is too bad that even he did not call out the billionaires “Fed” as the worlds biggest, most destructive parasite – even if it adorably shares the massive amounts of blood that it sucks from all Americans every minute with banksters, Wall Streeters, and their cronies.

      • K says:

        On reflection, read “Princes of the Yen” and other books on the massive, “accidental” economic bubbles blown by the Bank of Japan many years ago. The predictable collapse of those bubbles reportedly allowed foreign billionaires to buy huge portions of the Japanese stock market (particularly financial entities) for a song.

        Now, people that I would have assumed were bankster cronies and Wall Streeters (except for Grantham who has been making warnings for some time), are predicting that their beloved “Fed” may cause a financial collapse? That does not ring true.

        Could clever Wall Streeters and banksters have gotten together and blown up these bubbles precisely because their current control of the government and “Fed” enables them to time the financial crash, so they can buy whatever US companies that they do not yet own, for a song? After all, upon their demand, the “Fed” will be happy to use its power to create US legal tender to “print” out a trillion or three trillion or more US dollars to lend at 2.5% or less to its dear banksters to enable them to buy most, legitimate stocks of US companies.

        Am I being too suspicious, given the coming issues with the evictions, forebearances ending, lack of vaccinations, etc.?

  5. Seneca’s Cliff says:

    Does not look like people are starting business’s to do the two things we need the most these days. Growing food (agriculture) and making things (manufacturing).

    • K-Agri says:

      I did. Just incorporated a business to import and sell farm equipment, namely farm tractors. They’re pretty neat machines these days – air conditioned and self driving!

      I had been planning this pre-covid. The rise in agricultural commodities spurred me on even more.

      This is a “side gig” from my main white collar job. My main driver; the income from my white collar job is not high enough. I need to supplement with something else. I think a lot of these new start ups are borne out of this same necessity.

      • Wisdom Seeker says:

        I wonder how many other people have been freed (by work-from-anywhere) to start up long-desired side jobs that would’ve been impractical if they had to be in their main employer’s office all day long?

        • Wolf Richter says:

          At least one commenter here who is working in tech has been saying exactly that — WFH has allowed him to get a side-hustle going, and he is planning to make it his main-hustle when it is fully operational.

    • Thomas Roberts says:

      Seneca’s Cliff,

      America grows enough food and about half of the food never gets eaten. Between the farm, the store, and the home or restaurant; alot gets wasted. Cutting down on food waste, would leave America with an even bigger surplus. It’s important to note that the majority of food is grown by bigger farms and there is a very large price to start a farm.

      As for manufacturing, yes there definitely needs to be more of that. Small important stuff like food containers and pharmaceuticals needs to be made in America. For many things like appliances and furniture, there should be a law requiring it to be designed in ways that are easy to repair and use generic parts for replacement pieces.

      A fridge for instance, usually goes bad, because the motor dies, which is a simple part; if parts were generic, readily available, and easy to replace; you could cheapily fix it yourself or call a repair man to keep it running indefinitely. There would be little difference in cost to make most appliances this way. Also, I’ve always thought it was a scam that there isn’t good single drum washer and dryer (I’ve heard there was in the past). Furniture is a little more difficult, but there could be generic designs that if you bought, could be repaired easily.

      If stuff like that was done, where something is initially made, would be less important and local people or yourself could fix most things. Appliances and furniture are good places to start, because very little of it is made in America and they are expensive.

      • El Katz says:

        I’ve never had a motor quit on an appliance. The control boards? Yep. Several of them and most of them become “obsolete/unavailable” not long after the product is sold.

        • Thomas Roberts says:

          Those parts that do break are usually very simple and would be cheap and readily available if interchangeable.

          Fridges do become more energy efficient over time, but, if you could easily swap out the motor, it would be easy to upgrade (insulation built into fridge walls wouldn’t be though).

      • Augustus Frost says:

        I buy pre-owned furniture made of real wood, some of it antique as opposed to mostly cheaply made overpriced modern junk.

        As for appliances, disagree on a government mandate. This implies fines for non-compliance at minimum which is contrary to how any free society should be organized.

        The oligopoly problem? That’s a different issue that needs to be addressed.

        • Thomas Roberts says:

          The problem is that retailers and current manufactures behave in anti competive ways. A mandate like the one I’m describing would be able to bypass most of that. I do agree that it shouldn’t be necessary, but, it’s possible to do and would make America and customers better off. It’s more free for most people than current system.

        • Thomas Roberts says:

          To clarify, I mainly meant large appliances and it wouldn’t be a forever mandate. It could be something like Fridges, ovens, washers/dryers, and certain other appliances sold in America between 2023 and 2033 would have to be easily repairable and use interchangeable parts for pieces that wear out like circuit boards and motors. Alot would have to be added to this, but, it could help consumers and US economy. Over time, small US companies could manufacture replacement pieces (in America) and eventually the entire appliance. By the end of the mandate, consumers would naturally seek out easy to repair appliances, but they could also just keep their current ones running for a long time.

          For furniture, I was mainly considering recliners and couches. Right now, despite vast majority being made oversees, you still have to pay alot for cheap junk or absurdly be ripped off for better stuff. It might be enough to give money to some people so they can start non profits who would make standardized designs and also offer quality certifications. Right now, considering how terrible the price to quality is for furniture, even though it’s foreign made, pretty much anything would be an improvement.

      • Darlene says:

        Thomas Roberts,
        Biden could, with an executive order, disqualify all foreign made items from purchase by the U.S. government as long as there were a domestic manufacturer.

        More effective, no writing off of purchases of foreign made goods by businesses, as long as there were Domestic alternatives, which could be written off.

        Better yet, no write offs of employee salaries unless they passed the E-Verify test.

    • doug says:

      I see more growers at the area farmers markets. Local grown food can easily compete, and startup costs can be low. I don’t think these folks have an EIN, but could be wrong.

  6. Anthony A. says:

    I know three young people that started selling on Amazon last year. And they buy their “product” through Alibaba. They are still selling and I hear doing OK.

    • Heinz says:

      In my world so many of these small new businesses add very little productive value to overall economy. Most of it just involves money churn.

      Many self-styled ‘entrepreneurs’ seem to be no more than intermediary agents between a producer or distributor and consumer. They skim off the difference in price between what they buy it for and what they are able to sell to consumers (nothing unusual about that).

      These business people often produce nothing of tangible or intangible (intellectual property) value– they just again act as conduit middlemen.

      And the world has way to many middlemen.

      • georgist says:

        Totally agreed, Alibaba middle-men are just field agents for the CCP, ultimately. This isn’t going to dig the USA out of the hole it’s in.

      • Wisdom Seeker says:

        Heinz, I used to agree with you. But we now live in a byzantine world where Google and Facebook (etc) control most everything you see. AND where most products come from monopolies that don’t want you to know about alternatives.

        To break that stranglehold, having people connect producers to end-buyers does add some value, especially for smaller manufacturers or niche products.

        Like geologist I’d prefer we weren’t marketing CCP-made products via alibaba (which itself is a financial cesspool).

        But sites like etsy.com perform a similar service.

        We got great US-handmade face masks (and high-end filters!) via etsy.com when COVID hit and I’ve been a big fan since.

  7. WES says:

    I am a little skeptical about new business formation. When I look around, I don’t see more opportunities but rather less. Less as a result of the government lockdowns favoring big businesses. Less opportunities due to higher than ever debt levels. I suspect we will see much higher than average business failures. I hope I am wrong.

    • Thomas Roberts says:

      My initial thought was that most of these new businesses were gig workers and “independent contractors”. You get your work through an app such as Uber eats (food delivery) and every single driver counts as their own business. Some people might have several gigs and count as several businesses. Most don’t have alot of money on the line. Some gig workers get all their business from an app and some are actually independent.

      Not sure what most of the new retail businesses are. That’s the most puzzling one, I imagine most are independent contractors. I can’t think of many new stores in the area, definitely lost more than gained.

      If you hire new remote employees out of state, or they move, or you pay them to move, I imagine that having them be “independent contractors” saves a nightmare amount of extra paperwork.

      • Bobber says:

        One thing to keep in mind. Many of the new retail businesses are simply replacing old retail businesses that shut down during the pandemic. It may the case that the number of retail businesses is shrinking overall.

        In any case, I see lots of available street level retail space the new apartment buildings that have been built recently in my area. Small business have gradually filled this spots over the past two years. We know multi-unit housing has been going growing fast across the country.

        I suspect some of the deliver drivers contracting with Amazon could be coded at retail, even though they should be coded as transportation. The number of these drivers has expanded exponentially. I know from experience that coding for government tracking purposes is often incorrect. If I were delivering for Amazon and had the choice to check “retail” or “transportation”, I would check the retail box since I was delivering an online retail product.

        Then you have a bunch of young folks trying to make a few buck selling product or views on Etsy, YouTube, and Ebay.

        That said, my family is not buying anything from new businesses that I’m aware of, aside from all the Amazon deliver drivers. So I do wonder if all these new retail businesses are for real.

        • Harrold says:

          There are 2 new store front retail businesses near my house that specialize in reselling Amazon returns.

          Talking with one of the owners, he purchases Amazon returns by the pallet load, sight unseen, although they do give him a general description like ‘clothing’ or ‘electronics’.

          Some items are brand new still in the box, others are damaged or incomplete. He cleans and repairs what he can and resells it all.

          I have bought vinyl records from him.

      • Cas127 says:

        “most of these new businesses were gig workers”

        The Uber angle is a good one to raise…an army of struggling gig workers would get EINs to at least recast some more or less personal expenses as deductible business expenses – especially if your “employer” requires you to be an independent contractor.

        This was a good catch.

      • Wolf Richter says:

        Thomas Roberts,

        “Not sure what most of the new retail businesses are. That’s the most puzzling one, I imagine most are independent contractors. I can’t think of many new stores in the area, definitely lost more than gained.”

        Ecommerce. No one in their right mind is starting up brick-and-mortar retail store stuff.

        These are online operations. They’re cropping up everywhere. They’re selling everything, from salvage auto parts to specialty electronics. Some are using the Amazon platform and fulfillment to do so, others are making a go of it themselves. They’re everyone. There are commenters here that have jumped into this business.

        • Thomas Roberts says:

          That’s part of it, but, it doesn’t seem likely that it’s the majority. For many using certain platforms like eBay, it’s also likely that many of them (people buying and selling alot online) are not registered businesses. Amazon and some of the big ones require you to be a registered business, but not all of the smaller ones.

      • Jeff T says:

        Yep, and they likely have failure rates just like new restaurants. How long does the average gig delivery business of person and vehicle last?

    • Old School says:

      Big picture after all the deficit spending and Fed stimulus twenty year trend of retail sales growth is 3.8%. Main thing Fed has done is get people to pay 3X time sales instead of 1X, in other words blow a 3X bubble in stocks due to easy money.

      Same ratio pretty much applies to housing growth. Average long term price growth about 3.8%, but Fed has got pricing growing at about 3X trend over the last 12 months. Trying to central plan 330 million people isn’t going to work out well.

      • Cas127 says:

        “Trying to central plan 330 million people isn’t going to work out well.”

        Particularly with a blunt tool like money supply/interest rates.

        It is like trying to drive a semi with your *ick.

        (Of course, more invasive central planning would be worse…like trying to simultaneously drive a fleet of semis with other guys’ *icks.)

  8. Maximus Minimus says:

    How many “retail” jobs were sellers on eBay, or started the next big thing on YouTube, or sigh…opened a Robbin Hoods account.

    • Thomas Roberts says:

      Robinhood accounts and YouTube wouldn’t count as retail businesses. I imagine most new retail businesses are “independent contractors” working for a single retail business. Amazon and ebay sellers would count.

  9. Josh says:

    I know this came up a few months back the last time the EIN numbers came up but I know people who have started “consulting businesses” with no clients because they can’t find a job and don’t want an employment gap on LinkedIn. I imagine these would fall under the “low-propensity business applications” category but it was unclear when people need to create an EIN vs. if you can start a company without creating one. If many people are creating these dummy companies until they can find a job, that would also skew things.

    • Wolf Richter says:

      You don’t need an EIN for that. SS# is just fine. And I doubt they applied for an EIN to be a “consultant” without work. It’s just unnecessary.

  10. Tom21 says:

    So many oppertunities, a great time for a start up. Almost 30yrs with our business.

    We have never been this backlogged.

    Surrounded by business owners who are like us…. grey or bald and tired.

    Alot of retirements this past year, and more to come.

    I wish them the best. We have been blessed to be self employed.

    • VintageVNvet says:

      Ditto t3:
      Wishing all the real ”start up” folks the very best of luck after finally retiring in ’19 after almost 50 years as both employee at times and independent contractor most of those years.
      As Wolf says, ya don’t need an EIN to be an independent contractor/sole proprietor, until ya have employees, ) and, in fact, the IRS is actually helpful these days on correcting the Schedules needed if you make an error.
      I have been told by younger folks that the various software, some of it free now ”linked’ to on the IRS website, does an excellent job on all the calculations, etc., but with one exception, we never had a problem doing them with an old 10 key printing adding machine/calculator.

  11. Yancey Ward says:

    Maybe you need the EIN to get the PPP loans turned into grants.

    • Wolf Richter says:

      Yancey Ward,

      No, you don’t. SS# is all you need.

      • Yancey Ward says:

        You probably will if you weren’t really a business in the first place, Wolf. I am talking only about the fraudulent claims to the PPP program. Sure, you can get the loan with the SS#, but what happens when it come time to convert it directly into a grant? If your claim was fraud at the start, won’t you need to make it look like a real business at some point? I imagine a lot of the fraud came from people with fake identities, but surely not all of them.

        • Wolf Richter says:

          Yancey Ward,

          1. The PPP loans required that a business existed by a certain date before the Pandemic. So retroactively applying for an EIN is useless. It just doesn’t help in committing fraud or getting the loan. That is one reason why EIN applications had nothing to do with the PPP loans — because they would have come too late.

          2. If the total thing was absolute fraud to begin with, you don’t need the loan to be forgiven. You just disappear with the money since the entire entity was fraud, based on fake-everything. A lot of foreign entities did just that.

          3. If you had a real business but lied on your application to exaggerate the amount of payroll and submitted fake documents to prove it, and you didn’t get caught by your bank that processed the loan, it doesn’t impact the loan forgiveness. You can still get the loan forgiven, unless you get caught beforehand. The final revised loan forgiveness application was very simple.

          4. In case #3, when you have a real business but submitted fake documents and exaggerated your payroll, you’re subject to government fraud claims of all kinds, including bank fraud and wire fraud. Lots of people/businesses are being prosecuted right now.

  12. James says:

    Don’t know if this makes anyone commenting “feel better,” or more receptive to changes (which are the only certainties in life along with death & taxes, but my wife’s friend in Tokyo a Japanese businesswoman….scored big with her tired business which she was winding down when Covid hit & she filled out alot of complicated lengthy forms and scored about $20,000. Hers to keep & no questions or repercussions!

    These politicians and their governments and the central banks seem to have the same coordinated playbooks! Inflat or die!

  13. Michael Gorback says:

    Low propensity jobs = Etsy store opening during quarantine. : -)

  14. Rowen says:

    So many people I know opened up Squarespace/Shopify dropshipping fronts. Very little employment creation.

    Yeah, too bad about that of those “storefronts” are dependent on the Chinese supply chain.

    • Harrold says:

      Every storefront is dependent on Chinese supply chain.

      Except maybe Apple, which will also be dependent on an Indian supply chain.

      • Wisdom Seeker says:

        Strongly disagree. Plenty of farmers’ market & roadside grocery shopping you can do now, if you know where to go.

        Clothing is also largely non-China.

        I could go on…

    • Luke C says:

      I started my own eCommerce business during the pandemic. But I am not dropshipping and none of my products come from China or Alibaba or any dropship-friendly supplier for that matter.

      Mine are luxury products made in Italy, Australia, and the United States with strict distribution processes (prohibiting dropshipping). Thus, they are not on Amazon.

      Amazon is pretty much a giant flea market of “Made in China” junk. Entrepreneurs who strike out on their own are adding quality niche products on their own platforms. It’s the beginning of the end for Amazon. Although I’m aware it will take years to disassemble what Amazon created. But consumers are growing more and more skeptical of everything they buy on Amazon due to the prevalence of counterfeits from China.

  15. Micheal Engel says:

    1) S&P/Case-Shiller rock, but the Home Building sector plunged from
    May 2021 to Feb level.
    2) KB home & MDC down to DEC 2020 top.
    3) Hovanian down 40% from 150 to 90.

    • IanCad says:

      I see that lumber prices have dropped from $1,700.00 MBF down to $490.00 MBF today. Other building components must surely follow.
      Irrational exuberance may be running out of steam.

  16. MCH says:

    You know I think America has the right idea, because let’s face it, a number of these people who started new business likely realized one thing. It’s better to take a shot and invest in your own dreams rather than to fritter it away in “higher education” where basically all that happens is you get indoctrinated and receive less than a useful education.

    Then again, it is also the right move considering that the only thing holding back competition from the east *cough cough China* is the fact that relations are horrifyingly bad now. Otherwise, a flood of bachelors and higher degrees would come pouring in from China and fill in the jobs here. Read this funny article on SCMP about how the value of undergrad degree in China has been devalued due to just how many hold such a degree, and not just undergrad, but graduate degrees. And I can be fairly certain those guys can do basic math and wasn’t holding degrees on underwater basket weaving, or raised on the current mantra of math being systematically r****.

  17. IanCad says:

    Hope springs eternal in the human breast. So it seems from the number of optimistic, creative, and perhaps, more than a few deluded and unrealistic, would be new bosses.
    Good Luck to them!!
    How many more new enterprises would have been launched were it not for the tyrannical, initiative killing, vocational licensing burdens visited on a supposedly free people?
    Try painting a house, replacing a roof, performing general maintenance, building an accessory building – or a shed.
    Building a fence, laying a tile floor, installing a lawn sprinkler system. Setting up as a barber.
    Sorry Guys – No can do!! That’s illegal; and in California and many other states the full wrath of the law will be visited upon your mistaken endeavours.
    Far safer to become an influencer, a consultant or some kind of keyboard entrepeneur or diversity expert.

    • Chuck C says:


      In addition to what you mentioned, I would be hesitant to start a new business because one never knows when the governor of your state will impose another lock down.

    • OutsideTheBox says:


      All you have to do is get the training and pass the certification tests.

      Not a barrier….tons of people do it.

      You can as well.

    • Darlene says:

      You forgot the Big One; “Life Coach”,
      no license needed.

  18. Seneca’s Cliff says:

    Next to my shop, some guys started a weekend pop-up record (vinyl) shop. They rent some space in a “creative” workplace building that had gone empty over COVID and sell old fashioned records on saturdays and sundays.

  19. roddy6667 says:

    4 out of 5 new businesses fail in 5 years. Of those that succeed, 4 out of 5 fail in the next 5 years. The 10 year survival rate is 20% of 20%, or 4 percent. I wonder what the survival rate of businesses started during the pandemic is.

    • roddy, you saved me some typing. Just Google: Failure rate of new small businesses. It is actually 50% have failed after the first 5 years, not 80%, but the stats show a clear picture that going out on one’s own, even in the laudable tradition of American entrepreneurship, is fraught with all number of hurdles to overcome. Having started no less than 3 companies, with only 2 providing enough of a nest egg for me to retire at age 69.5, it is not for the faint of heart.

      Be ready to work at least 6 days a week, be at the beck and call of your clients virtually any time of day (sold a lot of diamonds on Sundays), and put in 12 hour days on a regular basis. NO WORKY, NO EATY. An empty refrigerator and wallet are great motivators for busting your butt year after year after year. Not saying it wasn’t very satisfying and even fun at times, but there is no money tree in the mailing of your EIN. You get out of it, what you put in. Enough said.

      • tom20 says:

        ” You get out of it, what you put in.”

        Very true. So make da*n sure you know your costs.

        I had been going back and teaching a class on consulting services.
        These were typically seniors in college. Absolutely no idea on what
        it cost to be self employed.

        • 3D Modeler says:

          They’re probably not aware of the difference in FICA taxes between reporting as a sole proprietorship versus as miscellaneous income from a hobby.

      • Turtle says:

        “Be ready to work at least 6 days a week, be at the beck and call of your clients virtually any time of day (sold a lot of diamonds on Sundays), and put in 12 hour days on a regular basis. NO WORKY, NO EATY.”

        Yes, do be prepared to do this for the first several years. I was below the poverty line for my first year or two in business, newly married and with one banana in the refrigerator – going to the drugstore for a single bag of chips as dinner to eat on an overturned laundry basket (BTW, this lifestyle is not hard when you’re in love).

        But don’t settle for that. Self-employment is a path ft affluence for many. Learn to scale and boost the value of what you offer. Become one of the best and raise your rates. Find ways to scale. That might mean going virtual or learning to delegate and outsource. For me it meant going from hourly services to virtual products.

        Don’t be afraid to set boundaries. People respect someone who respects themselves and their family. It’s fine to limit communication to weekdays and regular hours. It’s healthy to have a policy that lays out what you do and do no include. If you’re providing value, clients won’t leave you for something lesser. They’ll respect you.

        And don’t get into a dead-end business. You have to make money without killing yourself. I’d love to be a farmer. It’s my dream. But, I did my homework and I cannot accept that wildly successful means working virtually every day and netting $50K split between two owners. Hobby farming? Okay, but to make a living. Poor outlook.

    • David Hall says:

      An ultrasound technician quit her job to start a vegan food stand in a mall. Mall food stands are risky investments.

      Healthcare workers retired early trying to flee the virus. Some doctors fled to New Zealand where there were no infections.

    • Wolf Richter says:


      Yes, starting a business is risky. Sitting on your couch and not doing anything is a lot less risky (outside of the mental and physical health risks associated with that). I admire people who take risks to start something new. If it doesn’t work out, you move on. I’d rather do that than work for an evil outfit like Big G, whose decision makers ought to be sent to jail.

      Yes, I work seven days a week, and very long hours and don’t get paid vacations, or any vacations, and have no benefits. But it’s an awesome fulfilling activity and good business too.

      • Turtle says:

        Thanks for doing it, Wolf. But seven days a week is harsh. I’d love to see you find some way to stick it to Google.

      • MCH says:

        It’s not at all clear to me when you say “evil outfit like Big G” whether you mean Google or Government. In either case, you’re in trouble.

        Google will have you know that at it’s core, it isn’t evil. Calling it evil is grounds for liable.

        As for the government, well, DiFi and Paul Pelosi (Nancy is too good to soil her hands with the likes of you any more) will be paying you a visit to show you the error of your ways. They will suggest firmly that you stop with “your truth.”


  20. Susan says:

    I wonder how many are like me. After filing schedule C for years for my tiny consulting business, I formed an LLC slash S-Corp in 2021 in order to save on self employment taxes. After being unemployed for a year and living with inflation, I have to look out for myself.

    • VintageVNvet says:

      Tried the LLC route when first actually licensed as GC Susan,,, and my accountant told me a couple years later that I had better start declaring more ”net” if I wanted decent SS.
      The LLC was good when employing others, but definitely more work, and the C was enough to reduce the net to make the self employment taxes reasonable.
      In fact, even with the C I usually did NOT claim everything allowed by IRS rules.
      Trying to do the same as my grandfather, and live on the SS alone, while maintaining capital for the unknown unknowns always possible.

      • Susan says:

        Good points V&V. I have been working for a long time on the assumption that there will be no defined pension nor SS for me – by the time I’m old enough. The Corp will allow me to contribute more to a solo 401(k)

    • Anthony A. says:

      I had an S Corp for 20 years (engineering consulting). Did well, paid myself a salary and stock dividends. Had a solo 401K after retirement age. It’s all good.

    • BrianC - PDX says:

      We run our SW contracting firm as an Oregon C corp. This is nice when talking to our clients because the relationship is Corp to Corp. We can dodge the 12/18 month and you are out rule that a lot of them have. It also makes you look bigger and more solid to clients.

      One benefit is the taxes are a lot easier. I’m a W-2 employee of the corporation. (Though I am still 100% commission.) All of my health expenses are paid with pre-tax dollars through our 125 plan. The company does a straight up contribution to each employee’s 401K of 10% of gross billing. So with a maxed contribution on the employee side it adds up fast.[1] Also since we designed the plan, it is very flexible with regard to where/how you invest. (Obviously you can’t invest in your bother in law’s construction business…)

      Being in business for yourself means no gap in employment. Even though I often sit out for a few months every year, I’m still shown as continuously employed during that time.

      [1] The one time we got in hot water with the IRS was when one of our guys billed ~550k one year in the late 90s and contributed a significant amount *over* what was allowed into his 401k. Took about two years and 10k of lawyer/accounting fees to get that sorted…

  21. Micheal Engel says:

    “This time is different”. Thanks to the stimulus money, the PPP loans and JP we have never seen economy like that before ==> it’s a “new economy”, an amazing economy, AMZN economy, made in China economy.

  22. DanR says:

    As a global comment, it seems like there is a lot of complaints about rentiers, banks and speculators but what can we do about it? Should we focus more on how we can deliver value for others, keep up some work ethic, build some wealth and watch spending? These seem easier to personally control.

  23. Chris Herbert says:

    The data is confusing to me. This is going to take some time to suss out exactly who did what, and how they funded their new businesses. I still believe that unless incomes raise proportionally, the prices won’t hold up for long.

  24. c1ue says:

    Ritholz suspects that it is the waiters, bartenders etc – the people who work jobs to survive but really want to do something else – took their unemployment + stimulus, plus the time off, to start to try to do what they really want to.
    I wish them well.
    Nonetheless, the brutal reality of business is that 90% of new business startups fail.
    I don’t see how it will be different this time given earnings are still not keeping up with major expenses like housing – added to which transportation, food and more are inflating as well.
    Nor am I particularly impressed with Alibaba reselling – it is not much better than scouring red states for rare items desired by urban elites to sell on Amazon and Ebay.

    • Harrold says:

      Many people make a living drop shipping products from Alibaba.

      Its sorta a game for me to see if I can locate the same products sold by the major retailers at huge markups. Basically everything you see at Target can be found on Alibaba at 50%-90% of retail.

      • c1ue says:

        “Many” people make a living doing all sorts of bad jobs.
        It is far from clear to me that drop shipping Alibaba stuff is not a crap job.

  25. My former congressman who is now Rep in another district used his PPP to loan his campaign money. I wonder when the shell game is up how many of these jobs will be around. Even the legitimate businesses are going to shut down and the wild gyrations in employment will drive Fed crazy. Look inflation is 10% and so is unemployment! Just because economic indicators are out of phase doesn’t mean we are going to short circuit, but a real possibility.

  26. KGC says:

    I’ve had several business’s. I’ve imported machine tools from Europe, plastics from Asia, and a couple other ventures. I totally understand people looking for a way to generate income. But I also understand the huge difficulty in expanding a business beyond one or two individuals. This is what usually causes the failure of business growth beyond a certain point. It is incredibly difficult to succeed in building a small company in today’s market.

    • Jeff T says:

      So true. The challenge is to build a Husband / wife business that can generate a satisfactory income while building reserves for lean times. No bosses, no employees, the customer is not always right. Your boss cannot fire you because his nephew needs a job. So many benefits and rewards. Hard to do. C corps are great. Offset them six months from the calendar year. Have it fund wages, 401k, medical IRA, even pay dividends if you earn enough. Can take 3-4 years to reach this point.
      Builds personal wealth, SSI and offers liability protection so something bad doesn’t reach your personal life. Own a few rentals. Duplexes are great.

  27. Rant says:

    Do you need an EIN to help facilitate fraud, such as signing up for a PPP loan for your online retail business?

  28. OutWest says:

    I started my own business 9 years ago and it was the best thing I ever did. Working for others was rewarding but watching my previous employers skim profit off my productivity for about three decades tought me a few basic lessons about how it works. Fortunately, demand for my services spiked when Covid struck. I would encourage anyone to stick their neck out and start a new business. It is incredibly rewarding.

  29. Wisdom Seeker says:

    I wonder how many people have been freed (by either COVID-unemployment or work-from-anywhere) to start up long-desired side jobs that would’ve been impractical if they had to be in their main employer’s office all day long?

  30. Mike Bradley says:

    Another factor is that existing independent contractors are trying to strengthen their hold on their careers in the face of the national campaign to make everyone an employee.

  31. DB says:

    A small part of this might be RE investment. I found a large parent company paying cash for houses across the country which creates a separate LLC as owner of each house. Which can hide true ownership. Not sure how popular this practice is. That corporation seemed to have some ties with Alibaba, but in what way was not clear.

  32. Auldyin says:

    A rapidly automating economy is going to make the concept of full traditional ’employment’ a quaint old fashioned idea. The challenge for the developed World is how to fairly divi up the spoils of production. Do the shareholders get it all ?
    Instead of the Govt ploughing carzillions into artificial support of ’employment’ the money could be directed directly to the citizens and this data is maybe a glimpse of a future of what could happen. You don’t get large scale trials like this often.
    David Graeber reckoned there would be an ‘Explosion’ of creativity if people were freed from the chains of drudge employment that could be far better done by machines.
    Things are the way they are because things are the way they are.

  33. Samia W says:

    How is the real estate industry in other countries?

    Our business to start in 2005, the real estate sector at that time was stable in constant progression, the first shocks were mainly foreseen on the occasion of the attack on the place jemaa el fna, for 6 years, it is the plummet, the tourists who are essential in Marrakech are no longer there! the country is hit hard by the Covid

  34. A says:

    The pandemic show people who had to stop working, or work from home, or who were “essential” workers but treated even shittier than before…how much they hate “traditional” employment. I read about how in the Great Depression, some companies would vote for everyone to take a certain pay cut so they didn’t have to fire 10 percent of the people. They pulled together when they could; there was a loyalty to workers and employers. I’m sure it wasn’t always like that, and I know there weren’t as many workplace safety rules (though some, like me, would argue OSHA is a giant pile of shit because it doesn’t actually enforce much of anything – have an employee die? oh well, maybe pay a small fine? how naughty of you for ignoring this issue for years). Anyway, overall, the pandemic showed a lot of people exactly where they stood in the value to the company. NONE. If they risked their lives, someone might applaud, but if they wanted better pay or safety conditions? Whoa partner, let’s not get ahead of ourselves! But don’t forget, this is a FAMILY. You owe us loyalty…but we can kick you out, treat you like dirt, work you to death, and replace you with a snap of the fingers…but YOU owe US loyalty.

    Well, a lot of people are really angry right now. If they can make a leap to not being treated like shit, and make their own jobs, then…now’s a good time. Life’s too short to be treated like shit constantly. Like an abused wife finally leaving the man who tells her she can’t live without him, there have been some Final Straws that show thru the lies.

    It’s not as much of a risk as it used be seen as, either. Because where was the bleeping job security during “these troubled times” when big businesses made record profits and continued to treat employees like disposable garbage?

    Big Business (and even, unfortunately, many smaller employers) seem to see people are sheep to be shorn: as marks, as dupes, as their god-given right to exploit. To put it another way, to **** “human resources” coming and going.

    More power to the newly self employed. I wish them all well. Even if some of them are probably competing with me (also self employed). BTW I have an EIN but I didn’t need it to start my business and usually just use my social security number for tax stuff.

  35. tom21 says:

    Another weekend of eating/drinking locally. Mixed in with some office work. Local bands Friday & Saturday night.

    No shortage of folks making a living/chasing their dreams.

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