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More people are starting businesses today than ever before. The reason for this may be that the opportunity cost, or the sacrifices they have to make to become self-employed, is lower than ever before.
Data released by the U.S. Census Bureau earlier this month show that the total number of applications to start a business last year reached a record 5.5 million.
That is half a million more applications than were submitted in 2022.
Related: What millions of small businesses have in common, according to a new survey
Census Bureau data from the first four months of this year show that the startup boom is continuing: From January to April, the number of new business applications totaled over 1.7 million.
Why are more and more people submitting applications to start a new business?
Angela Lee, a professor at Columbia Business School, told Entrepreneur that the reason may be the “unprecedented number of layoffs at major technology companies in recent years, which has freed up a large pool of talent for self-employment.”
Angela Lee, professor at Columbia Business School (left), and Andrea Turner Moffitt, co-founder of Plum Alley Investments (right). Photo by Monica Schipper/Getty Images)
Lee, director of the Eugene Lang Entrepreneurship Center, also noted that “historically, entrepreneurship has been countercyclical because the opportunity cost of starting a business goes down during a recession.”
Related: Want to start a billion dollar business? Check out these two industries that have the biggest unicorn growth
Major technology companies have seen record numbers of layoffs in recent years.
According to the tracker Layoffs.fyi, 263,180 employees in the technology industry worldwide were affected by layoffs last year.
Amazon laid off the most employees last year (27,410), but Meta (21,000), Google (12,115) and Microsoft (11,158) also contributed to the record numbers.
According to the latest employment report from the US Bureau of Labor Statistics, the unemployment rate in the US remained stable over the past nine months, ranging between 3.7 and 3.9 percent.
Related: The April Employment Situation report shows employers reducing hiring and workers' wage growth slowing
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