I was diddling around this afternoon and came across this:
Business formation dipped at the very beginning of the pandemic but then spiked enormously in the summer of 2020. It went up and down a bit and then stabilized in 2021 at a noticeably higher rate than before the pandemic.
I'm not sure what accounts for this, but it got me curious about business formation on an industry basis. Here it is:
Utilities!?! Business formation in the utilities sector is currently more than double its rate before the pandemic. I really don't know what accounts for that.
Note that this is just new business formation. It doesn't include businesses that have closed, so it's not a measure of the net number of businesses. Still, it's kind of interesting.
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Crises tend to spawn new businesses, I think. At least, they upheave a lot of lives, which "creates incentive", as they say, and which gets people thinking in problem/opportunity mode.
I started my first company when worked dried up in the first dot.com crash. I recall my partners and I laughingly saying something like, "nobody else wants to pay us, so why not start our own company and not pay ourselves?" Second one was more for/with a family member, when they needed to change careers.
So the overall numbers don't surprise me.
But the utility concentration... makes me think this is about an outbreak of shell-company formation, not of anything that actually employs humans.
The pandemic relief funds helped a little this round too.
The utilities could also be one for every renewable energy project--plus the clean energy resellers. There probably in more rural phone/internet service providers--they have to zoom now too. Granted, they may be wholly owned subsidiaries.... Can't easily find data on new renewable energy company formation over time...
That was my thought, too--lots of new solar facilities that enter into long-term power purchase agreements with power companies, rather than being owned/financed by existing power companies directly.
Utilities sure sounds like renewable and energy storage developers. Storage in particular is growing from nothing.
I agree. that was my first thought as well.
Curious what the Census counts here. New llcs? EIN registrations?
Maybe it makes business sense to give every new windmill and solar farm its own corporate entity.
Well, there aren't as many utility companies as there are transportation and retail trade companies, so it's easier to have a larger percentage increase. Other than that, this doesn't really surprise me.
Two points
1. I think one needs to see new business formation in context. I believe, I lack data, that COVID caused a rise in businesses closing/business destruction. Seems like that data impacts how one sees new business formation.....
2. I suspect, once again lack data, the definition of a new business is expanding in the recent years. If I start to drive Uber, Lyft and work TaskRabbit part time have I started a business? Have I started three ?