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Will entrepreneurs still take risks?
Jared Franz
Economist

Questions for an uncertain time: Entrepreneurship


The past six months have provided a master class in uncertainty. COVID-19 touched nearly every aspect of daily life for hundreds of millions of people. Stocks fell drastically as the outbreak erupted — the fastest retreat to a bear market in modern history. They then recovered much of that decline in less than two months.


We asked Capital Group economists and analysts their opinions on COVID-19’s effects, both in the short and long terms. They covered topics as broad as the future of global trade networks and as narrow as the prospects for telemedicine.


Below, you’ll find economist Jared Franz’s opinions and insights on entrepreneurship.


You can also see political analyst Matt Miller’s ideas about the presidential electioneconomist Darrell Spence’s take on the labor market and economist Talha Khan’s ideas about international interconnectedness.


Will entrepreneurs still take risks?


By Jared Franz

One of this country’s bedrock characteristics is its dynamic entrepreneurial spirit. Business ownership isn’t just incubated here, it’s motivated. People want to take that risk.


In that context, I recently came across an encouraging piece of information: a big jump in business applications in June, as tracked by the U.S. Census Bureau. After falling sharply during the initial stages of the coronavirus lockdown, to around 50,000 a week, they ballooned past 80,000 a week in mid-June. They’re almost back to pre-lockdown levels, a swift rebound considering the degree to which COVID-19 has trammeled the economy.


To be sure, these aren’t actual business formations. Think of them as job applications — a worker sending out a half dozen résumés doesn’t create a half dozen jobs. In the same way, these applications don’t all become new ventures; the numbers just give a sense of entrepreneurs’ plans.


It’s also worth noting that bankruptcies — the opposite of business formations — could rise in coming months. We won’t know until official data comes in, but Google searches of terms like “business bankruptcies” provide a hint. Historically, such searches have tended to rise before actual filings did. And they’ve clearly been on an uptick since April.


Nevertheless, the business application data provides reason for optimism. It’s heartening that would-be entrepreneurs appear eager to launch new ventures during this downturn. This is positive in a couple of ways. In the short term, it suggests that animal spirits are springing back more quickly than expected, which could help an economy trying to regain its balance.


Beyond that, it points to a longer-term appetite for risk. That’s always important, but especially so now, as fear has emerged that the financial and psychic pain surrounding the coronavirus could dull the enthusiasm for risk-taking. Instead, I believe the jump in applications speaks to the resilience of entrepreneurs and the opportunities they perceive across the nation.


You can also see political analyst Matt Miller’s ideas about the presidential electioneconomist Darrell Spence’s take on the labor market and economist Talha Khan’s ideas about international interconnectedness.



Jared Franz is an economist covering the U.S. and Latin America. He has 14 years of investment industry experience. Prior to joining Capital in 2014, Jared was head of international macroeconomic research at Hartford Investment Management Company and an international and U.S. economist at T. Rowe Price. He holds a PhD in economics from the University of Illinois and a bachelor's from Northwestern.


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