New Business Formation Is Accelerating
This morning, Treasury Secretary Scott Bessent expressed some frustration with us for not paying more attention to the significant rise in business formation in the U.S. He highlighted this as a key outcome of the Trump administration’s pro-growth policies.
And, you know, he’s got a point. This is definitely something we should be looking at more closely. So, let’s dive in.
During a recent appearance at Breitbart News’s “State of the Economy” event, Bessent pointed to a surge in entrepreneurship as a sign that the current administration is fostering a more business-friendly atmosphere, which he referred to as “reprivatizing” the economy. He also discussed how artificial intelligence is making it easier for individuals to start their own businesses.
A Business Baby Boom
In July, Americans submitted 578,926 new business applications, marking an 8.1 percent increase from June and a striking 23.4 percent rise compared to last year. This figure represents the highest monthly total recorded in the Census Bureau’s seasonally adjusted data since July 2004, surpassing even the notable surge seen in July 2020 during the pandemic by 5.9 percent.
And it’s not just a one-off month. Applications have been on the rise since April, with the three-month average reaching a record 547,848—up 9.8 percent from the prior three months. So far this year, the total number of unadjusted applications stands at 3.87 million, reflecting a 13.8 percent increase from the same period last year and an impressive 79.4 percent bump since 2019.
After experiencing a surge in applications during 2020 and 2021 when the economy reopened post-lockdown, we saw a plateau, with numbers remaining fairly stable for several years. There was a notable decline of 4.5 percent in 2024, likely due to the Federal Reserve tightening interest rates to control inflation, coupled with extensive regulatory hurdles deterring business formation. However, following Donald Trump’s return to the White House, applications rebounded by 8.6 percent, reaching a record 5.67 million. This year, the trend continues, and if the current monthly pace is sustained, we might see around 6.3 million applications by year’s end.
These applications indicate tangible steps toward entrepreneurship. They’re a clear expression of confidence in the available opportunities within the private sector.
AI Opens the Door
Particularly notable is the rise in applications for professional, scientific, and technical services, which grew by 27.5 percent through July, contributing more than a quarter of the national increase. Additionally, information-sector applications soared by 34.2 percent, construction applications rose by 9.5 percent, and those in accommodation and food services climbed 14.2 percent.
AI seems to provide a plausible explanation for this uptick. Tasks that once required specialized personnel can now often be performed by founders using affordable software. For instance, Bessent mentioned how a small group of architects could start their own firm with minimal staff due to AI tools. In a broader sense, reduced startup costs are making more entrepreneurial ventures feasible.
Evidence from a Gusto survey involving 1,051 founders who started businesses in 2025 supports this idea. Around 60 percent reported using AI in their launch process, with half indicating that the technology had made the process significantly quicker or less costly. Research from Nasdaq also noted that sectors with high AI adoption accounted for nearly half of the increase in applications outside the typical employer category since February 2025.
Importantly, using AI doesn’t necessarily mean fewer employees. Gusto’s findings reveal that 49 percent of businesses incorporating AI into their operations planned to hire more staff, compared to only 41 percent of those not using the technology. Overall hiring intentions reached a three-year high.
A Big Beautiful Boom
The deregulatory efforts of the Trump administration are further enhancing this technological advantage. A directive requiring agencies to identify regulations for repeal whenever introducing new ones creates an environment more favorable to business. For new entrepreneurs, the burden of compliance costs can be significant, whether they manage the paperwork themselves or hire someone to handle it. Lessening these requirements can lower both the revenue needed for viability and the capital necessary to launch a business. Furthermore, expectations of a more favorable regulatory climate can influence decisions on investing personal savings into long-term ventures.
Additionally, significant tax reforms under the administration are encouraging new business ventures. The One Big Beautiful Bill made 100 percent bonus depreciation for qualifying investments a permanent feature, allowing businesses to deduct the full cost of eligible equipment in the year it is placed into service. This accelerates tax savings, improving cash flow and reducing effective investment costs. Moreover, the law permanently included a deduction of up to 20 percent of qualified business income for eligible pass-through business owners, eliminating impending tax hikes from their plans. Such measures enhance the potential rewards of starting and growing a business. Combined with the cost-saving advantages of AI, they appear to be transforming more entrepreneurial ideas into viable investments.
More Enterprise, More Possibility
Research by John Haltiwanger, an economist at the University of Maryland, alongside other collaborators, emphasizes that young businesses significantly drive job creation and productivity growth. Successful new entrants tend to grow, reallocating resources towards more efficient activities. A small number of rapidly expanding young companies contribute disproportionately to overall output growth.
The data aligns well with Bessent’s view on reprivatization. Policies that foster a welcoming environment for enterprise, combined with technology that reduces the bar for entry, can expand the number of Americans willing and able to step into entrepreneurship.
Bessent was right to highlight this issue. We truly should have been paying more attention to it.
