Black-Owned Businesses See Over 50% Growth

After the COVID-19 pandemic’s initial shocks to business owners, entrepreneurship rebounded, with the number of new business applications booming since 2020. According to the Census Bureau, national business applications remained fairly stagnant from 2017 to 2019, but between April 2020 and July 2020, applications more than doubled, from 235,695 to 546,415. Applications remained high through 2022, with 423,977 applications submitted in December of that year.

Black-owned employer businesses (firms with at least one employee) made up a large share of this growth. From 2017 to 2022, the number of employer businesses owned by Black Americans increased by 56.9 percent. Of the roughly 132,000 new employer businesses started in the U.S. between those years, at least 70,000 — over half — were Black-owned.

Black Business Ownership Jumped, Yet it’s Still Far from Parity with the US Population

From 2017 to 2022, the number employer businesses owned by Black entrepreneurs increased by 56.9 percent, or 70,581 firms, with an average annual growth rate of 9.7 percent. From 2021 to 2022 alone, the number of Black-owned employer businesses increased by 20.8 percent, to a total of 194,585 firms nationally. Yet despite this growth, the share of employer businesses Black people own is 3.3 percent — substantially lower than Black Americans’ 14.4 percent share of the population.

Compared to other race and ethnicity groups, Black Americans have the third-lowest representational share of employer business ownership. Native Hawaiian or Other Pacific Islanders have the lowest, representing 0.2 percent of employer business owners and 0.5 percent of the population; they are followed by American Indian and Alaska Natives, who represent 0.8 percent of employer business owners and 2 percent of the population.

Hispanic or Latino entrepreneurs also owned a lower share of employer businesses than their population share, representing 7.9 percent of owners compared to 18.7 percent of the population. Asian American and white entrepreneurs owned the largest shares of employer businesses: 11.1 percent and 81.1 percent, respectively, both of which are larger than their population share (7 percent and 74 percent, respectively).

All minority race and ethnicity groups saw increases in the number of employer businesses they owned over the 2017 to 2022 period. Asian American-owned employer businesses grew by 17.1 percent, Native Hawaiian and Pacific Islander-owned businesses grew by 39.5 percent, and Hispanic or Latino-owned businesses grew by 44.4 percent. In contrast, the number of white-owned employer businesses decreased by less than 1 percent, but still grew in total revenue, number of employees, and overall payroll.

These strong business growth rates across race and ethnicity show that minority business owners’ success does not come at the expense of white business owners. If economic growth was a zero-sum game across racial groups, the number of white-owned businesses would be expected to decline at 10 times the rate (7 percent), with comparable declines in revenue, employees, and payroll. Instead, growth among Black-owned businesses and other race and ethnicity groups helped drive a national economic recovery following the pandemic.

The Gap in Black Business Ownership by Sex Persists

From 2017 to 2022, Black-female-owned employer businesses increased by 71.6 percent—a higher rate than Black-owned and female-owned businesses overall.

The total revenue of Black-female-owned employer businesses increased by 82.1 percent, while Black-male-owned employer businesses saw a 63.9 percent increase in total revenue. In contrast, Black-male-owned employer businesses saw greater increases in the number of employees (43.7 percent) and annual payroll (75.4 percent) than their female counterparts, who increased their employee count by 31.8 percent and payroll by 67.9 percent.

Of the roughly 70,000 new Black-owned employer businesses created from 2017 to 2022, fewer than half (roughly 32,000) were female-owned, despite female people comprising 51.8 percent of the U.S. Black population.

Some Industries Saw a Sharp Jump in Black-Owned Businesses

Nationally, health care and social assistance is the industry with the most Black-owned employer firms, a spot it has held since at least 2017. However, in the other top 10 industries for Black entrepreneurs, there was notable growth.

For example, the number of Black-owned businesses in the transportation and warehousing industry increased by nearly 150 percent from 2017 to 2022, with the industry’s share of Black employers growing from 3.8 percent to 7.9 percent. In the real estate, rental, and leasing industry, Black-owned employer businesses doubled in the same period.

Strengthening National and Local Economies Depends on Growing the Diversity of Business Owners

Across the U.S., growth in business ownership and employer status was bolstered by a supportive environment for minority business owners. Black-owned employer businesses saw five years of continual growth, increasing from 2.2 percent of all employer businesses in 2017 to 3.3 percent in 2022. Despite COVID-19 shuttering businesses and disrupting local economies, Black-owned businesses—as well as those owned by Hispanic or Latino and Asian Americans—drove a rise in ownership and economic gains.

These business owners support their communities by creating jobs and driving local economic development. And while it’s difficult to say what national business creation trends may have looked like without this growth, it’s no stretch to say that the explosion in the racial diversity of business owners helped American enterprise.

Continuing to support Black-owned businesses isn’t just about creating a more inclusive economy that works for more Americans—it’s about strengthening the economy for all Americans.

A version of this article was first published by the Brookings Institution. Read the original here.