Startup Rate At Lowest Point On Record
The Great Recession and its aftermath may have a lasting effect on entrepreneurship, as the rate of unemployed people starting businesses has hit an all-time low.
Startup activity among unemployed managers and executives in the second half of 2011 was just 3.2 percent in the last two quarters of 2011, marking a continued slide from the 3.3 percent of jobless managers and executives who started businesses in the first half of 2011, according to a study released Tuesday by outplacement consultancy Challenger, Gray & Christmas.
By comparison, startup activity was considerably higher in the last half of 2011, when 6 percent of job seekers started businesses. It was even higher following the dotcom bubble in 2001 — though that downturn was particularly difficult on startups, 8 percent of job seekers at that time were trying to start their own businesses.
Besides the lack of unemployed people interested in starting businesses, the number of entrepreneurs overall is down. Self-employed Americans fell to a total of 8,587,000 in December 2011, according to the U.S. Bureau of Labor Statistics, down from 8,759,000 in December 2010 and the peak of 9,973,000 in December 2006.
“While big business definitely began to reap the benefits of the recovery in 2011, conditions were not nearly as fruitful for existing small business, let alone those attempting to get up off the ground," John A. Challenger, chief executive officer of Challenger, Gray & Christmas, said in a statement. "Credit was still very difficult to come by and demand for products and services remained soft. Basically, it was not a very inviting environment for would-be entrepreneurs."
There are some indications that 2012 could be a better year for entrepreneurship, with a National Federation of Independent Business study released Tuesday reporting small-business confidenceat a 4-year high. But if the environment doesn't improve enough to attract prospective entrepreneurs, the country could be heading toward a dearth of new businesses.
"Many medium and large firms are starting to add new workers," Challenger said. "Hiring at these firms may be improving just enough to lure potential entrepreneurs toward a more traditional employment path."
The Challenger quarterly report surveyed approximately 3,000 job seekers in various industries and occupations, though many of the respondents tend to be from the the executive and managerial level.