Perhaps as much out of desperation as inspiration, Tennesseans are forming new businesses in record number during the pandemic.
Tennessee Secretary of State Tre Hargett said Tuesday that new business entity filings jumped 42.2% in Tennessee during the third quarter compared with a year ago as Tennesseans tried to respond to the economic shifts and upheaval created by the coronavirus. Even though economic activity is still below pre-pandemic peak levels and employment last month across Tennessee was still down by 108,800 jobs from a year ago, Hargett said the state's economy is showing signs of bouncing back from this spring.
"The pandemic made a significant impact on our economy, but Tennessee's entrepreneurial spirit and business-friendly environment has seen some Tennesseans start their own businesses," Hargett said.
Tennessee recorded 16,470 initial filings for new businesses in the three months ended Sept. 30, or more than 5,300 additional business starts from the same period a year earlier. Initial filings have now seen positive year-over-year growth for 35 consecutive quarters in Tennessee, but this year has seen the biggest spike.
"We had an extraordinary increase in the third quarter and some of that is due to some timing issues in what has been a volatile year," said Dr. Bill Fox, director of the Boyd Center for Business and Economic Research at the University of Tennessee. "But we believe Tennesseans are seeing opportunities and this is a very entrepreneurial state. Some people who lost their jobs during the pandemic are making career changes and starting new businesses."
Indeed, Fox said areas of the state like Memphis that suffered the biggest job losses are experiencing the biggest jump in new business formations. Hamilton County recorded a 17% increase in initial entity filings in the third quarter of 2020 compared with a year earlier.
After spiking at 15.5 percent in April, Tennessee's unemployment rate has trended downward, falling to 6.3 percent in September before rising again last month to 7.9%.
By comparison, the national unemployment rate reached 14.7 percent in April and fell to 6.9 percent in October.
Fox said many jobs in retail, restaurant and entertainment sectors may not return any time soon as the pandemic continues to limit customer interest in large gatherings. But the pandemic also has created new opportunities and Fox said the new business filings "show that people across the state are embarking on new journeys like making masks, delivering food, providing enhanced cleaning services and more to make the best of the situation we are all in together."
State figures showed fewer businesses dissolved their state registrations in the third quarter, but Fox cautioned that many business dissolutions will be pushed back until the fourth quarter and the pandemic could force more businesses than usual to shut down in 2020.
"The initial filings have proven to be good leading indicators and we're seeing trends in the right direction," Fox said. "Having said that, we're in the middle of a pandemic and that could, of course, influence the outcomes from where we are now. But at this point, we're seeing growth in the right direction with unemployment rates generally dropping, sales tax revenues continuing to grow and business filings going up."
Fox said he expects "a generally jolly Christmas" spending season ahead, especially for state sales tax collections which are being buoyed this year by additional collections of online sales in Tennessee due to new court rulings and legislation that allows states to collect more sales taxes on e-commerce activity.
Contact Dave Flessner at firstname.lastname@example.org or at 423-757-6340.