DiNapoli: Pandemic Necessity and Opportunity Fuel Business Growth in New York City

June 28, 2024

Small businesses with fewer than five employees grew over 10% in New York City during the COVID-19 pandemic, according to a report released today by State Comptroller Thomas P. DiNapoli. The report details the growth in New York City’s small businesses, the industries that were most affected, and the areas, Brooklyn and the Bronx, that saw the highest increases.

"Across the nation, the pandemic reinvigorated entrepreneurship,” DiNapoli said. “Significant job losses during the COVID-19 pandemic took a toll on the city’s economy, but resilient New Yorkers fueled small business growth. Changes to how people work and how businesses operate, along with federal aid, allowed people to either start a business or expand by providing services more easily online.”

The overall number of businesses rose 6.5% in New York City compared to 17.4% nationally from the first quarter of 2019 to the first quarter of 2023. The impact of the COVID-19 pandemic on the city likely explains the large gap in growth. Still, small businesses with fewer than five employees increased in the same time period by 10.3%, which largely contributed to an increase in businesses overall.

Companies with more than 1,000 employees in New York City also saw 4.7% growth from the first quarter of 2019 to the first quarter of 2023. Similar to the rest of the nation, this was likely due to their ability to better withstand the financial and operational challenges of the pandemic. Meanwhile, the number of medium-to-larger size companies in the city generally declined over the same period.

Very small businesses were a key source of new economic activity during the first half of the pandemic in the city, as they accounted for more than 71% of all businesses citywide. During the second half of the pandemic, however, these businesses grew by only 1.2% citywide, similar to pre-pandemic levels, while nationally, they grew by a robust 14%.

Employment among very small businesses increased by 1% from 2019 to 2023, rising to 286,270 jobs, while employment among the largest businesses grew 9.6%, rising to 990,419 jobs. All other business class sizes had employment levels in 2023 that remained below pre-pandemic levels.

While Manhattan remained home to the largest share of city businesses at nearly 45%, newly created small businesses increased more in the outer boroughs. From 2019 to 2023, the number of very small businesses rose by at least 10% in every borough except Manhattan, with some neighborhoods seeing particularly dramatic increases. In Brooklyn, Bedford Stuyvesant had 35% more businesses, Bushwick had 30% more and Crown Heights North had 27% more. These neighborhoods were also home to many residents working in business services in 2019 like law offices or architecture or engineering firms, which are more easily performed remotely, helping fuel new businesses.

Other areas with significant small business growth over the four years included Manhattan’s Harlem (19.4%) and the Bronx’s Wakefield, Williamsbridge and Eastchester (12.7%). Manhattan below 96th Street saw declines or slow business growth as overall population, commuters and foot traffic declined.

Industry trends supported a rise in very small businesses in the city and the nation from the first quarter of 2021 to the first quarter of 2023. These firms grew in the construction, information, and professional and business services sectors. While information businesses led this growth, construction firms grew second fastest with an increase in renovation work for smaller multi-family homes.

At the same time, information and professional and business service companies expanded due to new online services and other technology. For example, software publishing companies, including app developers, accounted for 6.2% of all of the city’s small business growth in 2020. The expansion of these white-collar industries in the city was slower compared to national growth during the second half of the pandemic. This again reflected the pandemic’s greater toll on New York, but may also be caused by elevated rents, wages and inflation that added pressure to new businesses created when federal aid was easier to get.

DiNapoli’s report recommends that the city encourage small business growth further by continuing to:

Develop a business-friendly ecosystem by monitoring trends and policies that support these new businesses.
Support funding for start-up and growth-stage businesses with a focus on Black, Indigenous and people of color, immigrant communities and women-owned small businesses.
Foster business growth by expanding access to capital and mentorship for small business owners.

Report
Business Growth in New York City During the COVID-19 Pandemic

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DiNapoli: Pandemic Necessity and Opportunity Fuel Business Growth in New York City