The American Entrepreneurial Revival

By Presidio Wealth Partners on June 7, 2024

A Resilient Economy

The Covid-19 recession was one we had never seen before – and it is still impacting the economy today. U.S. GDP contracted 8% in the second quarter of 2020 and came roaring back, growing 12% in the second quarter of 2021. Consumption contracted due to the economic shutdown but quickly bottomed out once the economy opened back up. Government stimulus assisted businesses and individuals, which supported the economy, and we are still seeing effects from this today. The U.S. economy is experiencing faster growth than estimated pre-pandemic. Following a complete economic shutdown, how could this be the case?

Chart 1: The U.S. Economy Is Growing Above Pre-Pandemic Trend[1]

The Start-Up Surge

The stimulus injected into the U.S. economy, totaling $4.6 trillion,[2] is a major reason that growth came back so strongly. At the individual wealth level, Americans broadly got through the recession perfectly fine, in fact, their net worth actually grew. In the Great Recession between 2007 and 2010, the median net worth of American households fell 39%. Between 2019 and 2022, household wealth grew 36%, the most rapid increase on record.[3]

People had more time on their hands, as well as savings and disposable income from government stimulus. With that, business applications boomed. Monthly U.S. business applications nearly doubled in late 2020 and has remained well above pre-pandemic levels. High-propensity business applications (business that have a high-propensity of turning into businesses with payrolls) in Q3 2023 were 38% higher than Q4 2019.[4]

Chart 2: U.S. Total Monthly Business Applications Are 50% Higher Than Pre-Pandemic Levels[5]

Small businesses spur job creation and have a persistent effect on productivity. According to Evercore ISI, the start-up surge can help explain the combination of strong demand and strong supply in the U.S. economy today. Its research team states that young businesses tend to grow faster than older firms and have an outsized impact on labor demand. It believes this trend of growing start-ups and its impact on productivity will continue to play out over the next four to five years. It also believes the current positive growth in the economy is not a one-off event.

Chart 3: The Number of U.S. Businesses Grew in 85% of Counties From 2019-2023[6]

Can The Trend Continue?

U.S. business applications are still rising since the pandemic. In Q4 2023, 450,000 likely employer applications were filed, 37% more than Q4 2019. Technological advancements and growing work-from-anywhere environments are making it easier to start businesses. There remain 1.2 jobs available for every unemployed person in the U.S.

There are many factors spurring growth in the U.S. economy. Consumers are doing well with strong balance sheets, the job market is strong, wages are growing and inflation is falling. Another factor is the recent boost in start-ups, which is helping increase productivity and create more jobs. Evercore ISI believes the start-up growth seen from 2020-2022 will raise labor productivity by 2% over the next four years. The pandemic may have spurred a reintroduction of entrepreneurial spirit in the U.S. economy, which can provide positive tailwinds for years to come.

[1] Source: CBPP. As of April 3, 2024.

[2] Source: USASpending. As of April 30, 2024.

[3] Source: HBR. As of January 17, 2024.

[4] Source: Evercore ISI. As of May 29, 2024.

[5] Source: HBR. As of January 17, 2024.

[6] Source: American Progress. As of March 18, 2024.