Applications to form new businesses has held strong, even after accounting for pent up demand during pandemic-induced lockdowns.
In the first quarter of this year, there have been more than 40,000 new business applications. For comparison, that's 64% higher than the first quarter of 2019, according to a WUNC analysis of Census bureau data. Surveys from WalletHub show much of this activity is happening in small towns. Morrisville ranks No. 11 on a recent survey of best cities to start a business.
Experts say this is a knock-on effect of business shifts during the COVID-19 pandemic. Employees shifted to a work-from-home model that didn't require them to be in major metros. As workers shifted to suburban and rural areas, it drove a secondary need for more services in those areas. That's partly driving the increase.
WalletHub analyst Jill Gonzalez says there are three reasons.
"Lower overhead costs than the major cities. Stronger relationships with customers, which I think people really value now. And that potential to be a big fish in a small pond," she said.
These new business formations are helping to drive down the unemployment rate, which sat at 3.5% in March. Since 1976, which is how far back data are available through the N.C. Department of Commerce, the unemployment rate has been this low at only two other periods, for nine months in 1989 to 1990, and for nearly two full years from 1998 until early 2000. Until March, the North Carolina unemployment rate had not been at 3.5% or lower in nearly 22 full years.
Gonzalez says the economic pause in the middle of 2020 gave people an opportunity to go strike out on their own.
"We saw that during the pandemic that people really branched out. They decided that they could get paid for the things that they like to do," she said.
If there's one note of concern in the data, it's that a lower percentage of new business applications are considered "high propensity," or those "that have a high-propensity of turning into businesses with payroll," according to the census.
Of the 42,777 new business applications in the first quarter this year, 29% are listed as "high propensity."
