Feb 14, 201210:34 AMBlog

Jobs, fragile economy deter entrepreneurism

Feb 14, 2012 - 10:34 AM
Start-up activity among unemployed managers and executives during the second half of 2011 failed to rebound from the record lows recorded over the first two quarters of the year, according to survey results from outplacement consultancy Challenger, Gray & Christmas Inc.

During the last two quarters of 2011, an average of just 3.2 percent of jobless managers and executives started their own business. That was about the same as the previous two quarters, when 3.3 percent of job seekers started firms. The pace of start-up activity in the last half of the year was down significantly compared to the same period in 2010, when nearly 6 percent of managers and executives started their own business. Overall, 2011 was a dismal year for start-ups. The start-up rate fell to an all-time low of 2.5 percent during 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 start-ups, entrepreneurship was still pursued by an average of about 8 percent of job seekers every quarter.  Over the past eight quarters, the average start-up rate is 3.9 percent - less than half the 2001 average.

"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," said John A. Challenger, CEO of CG&C. "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."

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 in December 2006.
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