Sign of better times: US entrepreneur rate dips to prerecession levels

Posted on Apr 11 2014 - 3:43pm by IBC News

The rate at which Americans are starting new businesses declined last year to prerecession levels, according to annual figures released Wednesday.

The findings from the Kauffman Foundation, which studies entrepreneurship, suggest more individuals are landing jobs and not opting to start businesses out of necessity—a group referred to as necessity entrepreneurs. The business-creation rate declined to 0.28 percent in 2013—a level not seen since before the Great Recession. In other words, business creation dipped to 280 out of 100,000 adults last year, compared with 300 among 100,000 individuals in 2013.

The last time the rate was below 0.28

percent was in 2001, when it was 0.26 percent. “People are being attracted back into the labor market,” said Dane Stangler, the foundation’s vice president of research and policy.

Plus, those who are starting businesses are employed and taking the start-up plunge out of perceived opportunities, a group referred to as opportunity entrepreneurs.

“More entrepreneurs are coming into it from other jobs,” Stangler said. “They’re not doing it because they were forced into it.”

From 2012 to 2013, entrepreneurial activity rates decreased in all U.S. regions. The highest entrepreneurship rates were in the West and lowest in the Midwest.

The entrepreneur report mirrors recent labor market data. The March employment report showed the U.S. economy added 192,000 new jobs for the month, while the unemployment rate held at 6.7 percent, according to the Bureau of Labor Statistics.

Kauffman’s annual data also offered a peek into how veterans are faring in their return to civilian work life.

Veterans in 2013 started fewer businesses compared to the general population. The business- creation rate last year was 0.23 percent for veterans, slightly lower than the overall rate. During the past five years, entrepreneurship rates among veterans have dipped below the rate for nonveterans as older veterans from the Korean and Vietnam conflicts have retired.

However, veterans from Afghanistan and more recent conflicts are transiting into civilian work life, and their entrepreneurial activity may not be showing up yet in the data, Stangler said.