May was yet another strong month for new business applications, with 436,048 new applications for a federal tax ID.
As the U.S. Census chart below shows (click to enlarge), May's new business applications continued their 3-year run of being about 40% higher than pre-pandemic levels.
This leads us to believe that the higher level of new business applications is the new normal.
So while we'll continue to report on this data, we'll no longer use terms like "surge" or "huge" to describe the numbers as long as they continue in the 400,000 - 5000,000 per month range.
As with all our articles on this topic, it's important to point out that:
New business applications are applications for a federal tax ID. And only about 20% of those who apply for a federal tax I.D. start a business.
So no, and despite what you may read, 436,000 new businesses were not started in May.
But around 80,000 will likely be started over the next 1-2 years based on May's applications. By historical standards, this is still a big number.
May's numbers also continue the long-term shift to solopreneur applications, with about two-thirds coming from solopreneur applications (called applications other than high-propensity by the Census).
This means most of the new businesses formed from May's applications will be freelance, gig economy, or other types of solopreneur businesses.
