Lowest Startup Rate on Record in the US as Jobs, Fragile EconomyDeter Entrepreneurship

By Vallabh Rao|16th Feb 2012
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Contrary to what one would think about the overall startup activity during difficult economic times, startup activity in the US among unemployed managers and executives in the second half of 2011 failed to rebound from the record lows recorded over the first two quarters of the year, according to new survey results from outplacement consultancy Challenger, Gray & Christmas, Inc.

The Challenger survey is conducted quarterly among approximately 3,000 job seekers reentering the workforce in a variety of industries and occupations across the country. While all career levels are represented, the survey pool tends to skew toward the more experienced, managerial and executive level job seeker.

Overall, 2011 was a dismal year for startups. The startup rate fell to an all-time low of 2.5 percent in the second quarter of the year. It rose slightly to 3.7 percent in the third quarter, only to fall again to 2.7 percent in the final quarter.

Even in 2001, amid the dot.com collapse that was particular devastating to recent startups, entrepreneurship was still pursued by an average of about 8.0 percent of job seekers every quarter. Over the past eight quarters, the average startup rate is 3.9 percent -- less than half the 2001 average.

It is not just job seekers who are reluctant to start businesses; the number of self-employed Americans, in general, declined by 172,000 last year, falling from 8,759,000 in December 2010 to 8,587,000 in December 2011, according to data from the U.S. Bureau of Labor Statistics. The December figure is nearly 1.4 million fewer than the pre-recession peak of 9,973,000 self-employed inDecember 2006.

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