New business applications surged virtually everywhere in Maryland last year

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New business applications increased in nearly all Maryland counties in 2020, according to data released Thursday by the U.S. Census Bureau, a rare surge during a year dominated by the coronavirus pandemic.

The number of new business applications increased in Baltimore city and 21 of Maryland’s 23 counties, with the only exceptions being Garrett and Kent counties. It marks a sharp difference from data released last year, which found new business applications declined in eight Maryland counties and Baltimore city in 2019.

Prince George’s County and Baltimore city were among the jurisdictions with the largest increases, with new business applications growing by 45.7% and 41.5%, respectively.

The surge in Maryland is part of a nationwide trend that showed a record-breaking number of new business applications last year — a particularly surprising economic effect of a pandemic that has decimated economies nationwide.

The 2020 calendar year saw the most new business applications of any year on record. In Maryland, new business applications increased by 28.8% from 2019, the 11th highest percentage increase among all states.

July 2020 saw the largest surge of new business applications on record.

That’s the same month Joseph Lorick started his business, Backyard Theaters LLC, in Baltimore.

With movie theatres shuttered during the pandemic, Lorick realized there was an opportunity to offer people a place to watch movies and replicate the movie theater experience.

The business rents out projectors, movie screens, chairs, inflatable movie rooms and more to try to replicate the movie-watching experience for occasions such as birthday parties, block parties and drive-in events.

So far, the business has made about $40,000 in revenue, Lorick said.

Lorick said assistance such as unemployment benefits was helpful, but people had to “be creative” in how to supplement that money.

“People had to figure out ‘OK, how do I still continue to provide for my family because what I’m getting is a nice supplement, but it’s not enough?’” Lorick said. “That forces people to be innovative.”

The details behind this nationwide surge offer evidence of restructuring across the U.S. economy.

John Haltiwanger, an economist and distinguished professor at the University of Maryland, analyzed the nationwide trend in a report last month. He found that the surge in new business applications differed depending on the sector, with “nonstore retail” accounting for a third of the surge.

“[T]he COVID-19 Recession has induced a change in the structure of the U.S. economy towards more remote activity and this provides incentives for new businesses to explore such potential opportunities,” Haltiwanger writes in his analysis.

The number of new business applications experienced a sharp decline in the early months of the pandemic — a sign that Haltiwanger believed was reminiscent of the Great Recession. But it began to surge in June 2020 and has continued through May 2021 as new data flows in.

“The first six weeks, we thought, ‘Oh, here we go again.’ And then it turned, I’ll say remarkably,” Haltiwanger said.

There was a surge of new business applications for both likely employer and nonemployer businesses.

What makes the increase of new applications for likely employer businesses surprising is the presence of the Paycheck Protection Program, a part of last year’s CARES Act that intended to protect jobs of existing small businesses, Haltiwanger writes.

Research has suggested that helping existing businesses could suppress new businesses.

“Viewed from this perspective, the surge in applications for likely employer businesses is arguably not because of, but despite, the PPP program,” Haltiwanger writes.

And even as the U.S. economy has continued to reopen, the number of new business applications is continuing to spike. May 2021 saw the second-highest number of new business applications, only behind last July.

“The economy is recovering quite robustly, and if you want a wage and salary job, there’s lots of opportunities out there,” Haltiwanger said. “We’re actually seeing at the same time, a tremendous surge in new business applications, so I think that it’s broadly consistent with the restructuring characterization.”