Entrepreneurship Recession Proof, Hits 14-year High
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According to the Kauffman Index of Entrepreneurial Activity, a study that measures the percentage of the adult, non-business-owner population that starts a business each month, 2009 has had the highest level of entrepreneurial activity in 14 years, even exceeding the number of startups during the technology boom of 1999-2000. Carl Schramm, president and CEO of the Kauffman Foundation, suggests that challenging economic times can motivate those who have been laid off to become their own employers. And in this trend ofincreasing entrepreneurship can lay the key to economic recovery.
By capturing new business owners in their first month of significant business activity, the Kauffman Index of Entrepreneurial Activity provides the earliest documentation of new-business development across the country. Index data is obtained fromthe monthly Current Population Survey (CPS), conducted by the U.S. Bureau ofthe Census and the Bureau of Labor Statistics.
New 2009 data allow for an update to previous reports, revealing important shifts in the national level of entrepreneurial activity,and in the demographic and geographic composition of new entrepreneurs acrossthe country between 1996 and 2009. Interactive data spanning all 14 years isavailable at www.kauffman.org/kiea.
Findings for the 2009 study include:
- The number of new businesses created during the 2007–2009 recession years increased steadily year to year. In 2009, the 340 out of 100,000 adults who started businesses each month represent a 4 percent increase over 2008, or 27,000 more starts per month than in 2008 and 60,000 more starts per month than in 2007.
- In 2009, 558,000 new businesses were created each month (0.34 in 2009). The index increased for the second straight year, from 0.30 percent in 2007 to 0.32 percent in 2008.
African-Americans and older Americans experience greatest increases in business-creation rates from 2008 to 2009
- Among states, Oklahoma and Montana had the highest entrepreneurial activity rates, with 470 per 100,000 adults creating businesses each month. The other states with the highest rates were Arizona (460 per 100,000 adults), and Texas and Idaho, both with 450 businesses started per 100,000 adults. The five states with the lowest rates of entrepreneurial activity were Mississippi (170 per 100,000 adults), Nebraska (200 per 100,000 adults), Pennsylvania (200 per 100,000 adults) Alabama (210 per 100,000 adults) and Minnesota (220 per 100,000 adults).
Entrepreneurial activity increased from 2008 rates for both men and women (from 0.42 percent to 0.43 percent for men and from 0.24 percent to 0.25 percent for women).
- The business-creation rate increased from 2008 to 2009 for non-Latino whites, from 0.31 percent to 0.33 percent, but declined for Latinos (from 0.48 percent to 0.46 percent) and Asians (from 0.35 percent to 0.31 percent).
- The immigrant rate of entrepreneurial activity declined slightly from 0.53 percent in 2008 to 0.51 percent in 2009, but remained substantially higher than the native-born rate of 0.30 percent.
- Although the western states continued to have the highest rates of entrepreneurial activity, this region saw a sharp decline from 0.42 percent in 2008 to 0.38 percent in 2009. Business-creation rates increased in the Midwest and South.
- Among the United States’ fifteen largest metropolitan statistical areas, Houston had the highest entrepreneurial rate (0.63 percent) in 2009. Seattle had the lowest rate (0.16 percent).