New high for post-pandemic business openings

Despite macroeconomic headwinds such as rising interest rates and lingering inflation, the U.S. economy remained resilient and exceeded expectations. With the help of cooling inflation, thanks to the Federal Reserve’s interest rate hikes, and low unemployment, the much-feared recession did not come to pass. 

Another factor which helped the U.S. economy exceed expectations in 2023 was a surge of business growth, surpassing the record-high set in 2022.

Business openings were up 20.3% in 2023

Entrepreneurs were on fire throughout 2023. Continuing the upward trend in new business openings seen in 2022, every month in 2023 surpassed its 2022 counterpart, with the lowest year-over-year increase in business openings totaling 9.6% in September.

In 2023, business openings totaled 762,227 openings – a 20.3% increase from 2022. Comparing 2023 business openings to pre-pandemic business openings, business openings are up 40.1%.

Overall, business growth has helped the U.S. economy remain resilient in troubling times, with U.S. business openings bouncing back from the pandemic in 2021 but seeing an explosive increase in new business openings staring in 2022. 

Home services led new business openings in 2023

Every category that is tracked on Yelp experienced an increase in business openings in 2023. Home services led new business openings with 278,913 openings, surging 32.3% from 2022 which totaled 210,784 openings.

A reason for this surge in home services business growth may be due to the elevated interest rate environment in the U.S. With higher interest rates, purchasing a home becomes more costly, resulting in homeowners choosing to delay new-home purchases and remain in their current homes if they locked in at a lower interest rate. Instead of buying a new home, current homeowners may choose to undertake home improvement projects to renovate their homes.

Restaurant openings have surpassed pre-pandemic levels.

Despite being one of the hardest hit retail sectors by the pandemic, restaurants openings have finally bounced back from the pandemic, with restaurant openings rising 10.4% from 2022 and are up 1.5% from 2019. 

In 2020, restaurant openings declined drastically as stay-at-home-orders and public health concerns boosted demand for online grocery orders and deliveries. As the economy began to slowly reopen in 2021, consumers’ desire to socialize, encouraged dining out. Also, the next two years saw a period of elevated core and grocery inflation. While consumers continued to dine out despite higher prices, grocery inflation may have pushed more people to dine out as the cost of groceries became more expensive. Restaurant & bars spending surpassed grocery store spending in March 2021 and the gap between the two has only widened, with restaurant & bars spending continuing to outpace grocery store spending in 2023.

Speaking of dining out, 2024 is the year I expand my palate by trying new foods. If you have any recommendations for restaurants in the Los Angeles area, please let me know!