- Americans created 10.5 million businesses in the past two years, according to Census Bureau data.
- That momentum is expected to continue in 2023 despite inflation, layoffs, and recession fears.
Americans created 10.5 million new businesses in the past two years, according to Census Bureau data.
Experts say momentum could continue in 2023, despite inflation, layoffs, and recession predictions. After all, people have historically started more businesses during recessions.
"We're in a period of a relatively strong economy," said Lawrence White, an economics professor at New York University. "I think we're going to continue to see a strong pattern of new business formation."
Additionally, small private companies are adding jobs, one of the reasons we're not in a recession yet, Insider previously reported. Cynthia Franklin, the director of entrepreneurship at NYU's W.R. Berkley Innovation Labs, added that unemployment was low and American consumers felt reasonably confident about their financial futures.
These positive indicators suggest the economy isn't headed for a deep recession, she added.
"It's always a good time to start a business," White said. "If you've got a good idea, if you've got the ability to follow through, it's always a good time."
White and Franklin gave three reasons now is a great time to start a business.
1. We're still in a relatively strong economy
The US Federal Reserve hiked interest rates seven times in 2022 in an effort to tamp down inflation, and the central bank has continued to raise rates in 2023.
"The Fed has been very aggressive, some would argue too aggressive, but it does seem to be cooling things down a bit," Franklin said.
Inflation has eased, but prices are still climbing faster than Fed policymakers would like.
"Things aren't going to be quite as bubbly and ebullient as they have been for the past couple of years, but it will still be a relatively strong economy," White said.
And a strong economy means plenty of opportunity for entrepreneurs, he added.
2. Many businesses are well positioned to weather a recession
Franklin said any recession that does play out would be mild. "I don't think a deep recession is imminent," she added.
Plus, many startups and small businesses have already made the shifts and cuts to prepare for a downturn, such as rethinking office space, adopting digital tools, moving to less expensive cities, and enhancing customer service, she added.
"If there is a recession, many businesses that have weathered the pandemic are well positioned to also weather the downturn," she said.
But recessions don't hit all businesses the same way, Franklin added. "There are always some bright spots," she said, "because one person's suffering is another person's opportunity."
3. Certain industries bubble up in downturns
During a recession, there are always certain industries that continue to do well or "bubble up," Franklin said. Many of today's successful companies started during the Great Recession, such as the hair-salon chain Drybar, the vacation-rental platform Airbnb, and the file-hosting service Dropbox.
Some industries, like healthcare and logistics, are poised to gain momentum this year because of shifting demand.
"There are certain things that never change," Franklin said, such as "services and products that people will always be seeking out" like wellness and mental health.
White expects to see a return of the service industries this year, from pent-up demand during the pandemic. "Not that they're giving up on goods, but as their incomes expand, they will tend to favor more services," he said.
And that could be good news for aspiring entrepreneurs looking to start easy businesses this year.
"It's usually easier to start a services business than to start a goods business," he said.