Americans aren’t letting the slow economy stop them from starting new businesses.
Key Details
- Despite the slowing economy, Americans are continuing to file for new business applications.
- In October new business applications in the U.S. grew by 1.2% compared to the month before.
- The formation of new businesses in an economic downturn can be both good and bad. Startup costs will be lower, but customers might not have the funds to buy from the business in the beginning which can be hard at the start.
- Building a business in a down economy can prepare management for when things get better.
Why it’s news
Americans have been suffering from skyrocketing inflation prices and building fear that the economy is possibly on the brink of recession.
Despite all the economic uncertainties—Americans are still starting businesses. New business applications in the U.S. grew by 1.2% in October compared to the month before.
Many household business names have been born in times of economic turmoil like Airbnb and Uber which were both founded during the Great Recession.
Many people have business ideas and decide to put them into action while startup costs are low. Not only that, but in times like these new companies will have an easier time hiring employees.
One big roadblock for the new businesses is—customers might not have extra money to spend during an economic downturn. As Americans are being continuously faced with high prices due to inflation they might not have extra money to spend and support new businesses.
“The challenge, of course, is that then your customers may not be in a position to buy whatever it is you’re selling,” says Cornell University economist Erica Groshen. “So it depends on what you’re selling.”
The total number of applications for October is about the same as this time last year and economists think the number will start to slow down soon. Many people have jumped to file their applications in hopes to get it in before rates rise.