September 24, 2022
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Great Resignation, gig economy bring a surge in new DC businesses

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Call it the Great Hustle.

Despite record unemployment and concerns of widespread business closures early in the coronavirus pandemic, the number of people seeking to start and develop their own businesses in the D.C. region surged, a Washington Post analysis shows.

While more than 1,000 establishments in sectors including food services, construction, entertainment and wholesale disappeared during the first part of 2020 in the D.C. metro area, the number of new brick-and-mortar businesses continually increased in the next few quarters and surpassed the number that closed, Bureau of Labor Statistics data shows. That growth — much of which came in educational services, health care, construction and finance — does not include the online shops that economist say have grown as well.

Covid closed downtown D.C. businesses. Many reopened — in the suburbs.

Combined, the District, Maryland and Virginia saw applications for business licenses jump from about 176,000 in 2019 to 219,000 in 2020 and 262,000 in 2021.

The surge was a surprising byproduct of the pandemic, experts said, as new business owners emerge in an effort to supplement dwindling incomes, turn hobbies into professions or embark on new ventures.

The latter was the case for Teresa Padilla and Geraldine Mendoza, who were displaced from jobs as a pastry chef and a restaurant manager, respectively, after the pandemic hit in March 2020. Their jobs were among the more than 140,000 positions in the food and accommodation industry that disappeared in the months after the pandemic began across the D.C. metro area, according to BLS data.

But in the summer of 2020, Padilla and Mendoza began selling sandwiches from a Capitol Heights pop-up kitchen and a food truck, found success, and then secured their own building. In October 2020, they opened their brick-and-mortar eatery, Taqueria Xochi, a fast-casual Mexican restaurant in the District, named after the ruins of Xochitecatl in central Mexico.

Padilla now works as the head chef and Mendoza as the operations manager. The business grew quickly, Mendoza said.

“It happened unexpectedly and organically,” she said. “Thankfully, we had a lot of friends that told the city about our food through word of mouth for us. And that’s what gave us the confidence to push and to say, ‘OK, this is going to work.’ ”

The local boom in business creation, experts say, could yield a spike in innovation and a shift in workplace culture, forcing companies to re-examine their relationships with workers, who have quit in waves for new jobs or to strike out on their own.

“As time has gone on, we recognized that the pandemic is leading to a restructuring of the economy,” said John Haltiwanger, an economics professor at the University of Maryland at College Park. “I think we were surprised by the [application growth] because early on in the pandemic, our economy was contracting just an enormous rate — but then it started to turn around.”

In the pandemic’s first year, D.C. leaders expressed growing concerns surrounding the dwindling number of business license applications submitted — which would ultimately translate into less commercial tax revenue for the city.

“We know that a full recovery is going to require getting the District’s businesses and owners and entrepreneurs back to doing what they do best, which is sharing their ideas and employing and serving District residents,” D.C. Council member Brooke Pinto (D-Ward 2) said in a spring 2021 committee meeting.

Prince George’s County economy rebounds from pandemic job loss

New trends then began to develop. Among them: Many workers regained crucial hours in their days when they started working from home early in 2020.

“The pandemic definitely allowed us the luxury of having more time and energy,” said web developer Nameer Rizvi, who lives in Ashburn, Va., but worked in D.C. “My commute to the office was two hours there and then two hours back. So to have that four hours of the day back, that definitely helped.”

The newfound time allowed Rizvi and his partner, Naomi-Grace Panlaqui — also a web developer — to follow up on an idea they had seeded in early 2020: an app to aggregate concert listings from across D.C.

Rizvi and Panlaqui named it DC Music Live. For now, they said, they’re still freelancing and working regular jobs while tinkering with the app, which is still in its early stages and not yet profitable.

The pandemic-era commute might be changed forever

Experts said the pandemic accelerated the trend of people going into business for themselves, which had been jump-started by the emergence of Etsy, Uber and Lyft. A 2019 U.S. Census report published by a team of economists reported that self-employment held a relatively stable share of the workforce for about 50 years — until a rise within the past decade.

“I think that we’re seeing, in many ways, the long-anticipated rise of the gig economy,” Haltiwanger said. “I think it really took off in the pandemic, partly because we realized we could actually do it.”

Gig-economy jobs and how to manage the irregular income

D.C.’s Small Business Development Center, located at Howard University, helps would-be business owners with basic start-up classes in areas such as financial literacy, business promotion and international expansion. In 2019, Executive Director Carl Brown said, the center helped 800 people. A year later, that number more than doubled, to 1,640, and then hit 1,665 in 2021, he said.

“I’ve never seen it like this before,” Brown said. “There’s no sign of this slowing down.”

Some in the region, such as D.C. resident Will Deatherage, started their own businesses because the pandemic made it tougher to find a job. Deatherage built Catholics for Hire — a media consultant group — after his internships disappeared when pandemic lockdowns went into place.

“I had about 10 or 15 job applications that I was pursuing,” he said. “They were all going very well. I was getting a lot of callbacks, lots of interviews, and all of a sudden the pandemic hit and every single one of those job opportunities — gone. Hiring freezes, budget cuts. A total economic panic.

He and his team now help clients with ​web design, video and podcast production, graphic design and music composition. Mentoring college students and providing them with career experience is a focus, too.

As the gig economy grows, parents find flexibility and fulfillment — and pitfalls

Other new entrepreneurs were part of another side of the pandemic’s reshaping of the workforce: an explosion in resignations. From April 2021 through May 2022, an average of more than 4 million people nationwide left their jobs each month, the highest level ever recorded since at least 2000, according to BLS data.

Elizabeth O’Donnell was a part of the pandemic resignation wave. O’Donnell, 31, had been a D.C. Public Schools teacher for seven years, but after her daughter Aaliyah was stillborn at seven months in 2020, O’Donnell said she was denied paid family leave. (DCPS did not respond to a request for comment.)

The experience pushed O’Donnell to leave DCPS and found Aaliyah in Action, an organization that provides families with care after the loss of their baby, for which she also serves as CEO.

If employers or industries don’t support workers, O’Donnell said, “people will leave the profession, or they’ll leave and go find somewhere else that they’re valued.”

How D.C.-area employers kept workers happy amid the Great Resignation

Local governments play a vital role, Montgomery County business liaison officer Daniel Koroma said, in creating an ecosystem that provides support to new businesses — with tools such as start-up grants, office spaces and programs that help owners manage their businesses properly. But some local jurisdictions and business development centers, Montgomery among them, are finding it difficult to keep pace with the recent surge in new businesses.

In Montgomery, which had previously struggled with business formation, officials say they are seeing an almost 30 percent increase in demand for business licenses and services since the beginning of the pandemic.

“We need to be more comprehensive, and when we do that, then we are able to help small businesses to become viable in the industry because it is important that we provide to them,” said Daniel Koroma, a business liaison officer for the county.

‘Zero regrets’: Six months after quitting, these workers are thriving

Still, Haltiwanger said, most licenses will probably not turn into businesses or, if they do, might not stick around. In Virginia, more than 30 percent of business licenses established in 2020 have already been canceled or terminated, according to State Corporation Commission data analyzed by The Washington Post.

That’s common, though, Haltiwanger said, and such failures often drive innovation. The eagerness of people willing to start new businesses is a good sign for the economy, because as businesses grow they can create new jobs, he said.

“You can’t have our economy without experimentation and entrepreneurship,” Haltiwanger said.



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