Jobless starting businesses at 11-year low
Posted By Admin on September 5, 2011
According to Challenger Gray, the decade high was 13.1% of jobless starting businesses in the second quarter of 2005. A year ago, 3.9% of unemployed managers and executives were starting businesses rather than look for a job, and in the first quarter of 2011, 4.1% were starting businesses.
The lack of business startups is significant because they are the source of most new jobs, according to a study by the Kauffman Foundation.
Startups remained high in 2009, according to the Kauffman Foundation. But has the slow economy has dragged on, fewer are making the leap.
Even in 2001, amid the dot.com collapse that was particular devastating to recent start-ups, entrepreneurship was still pursued, on average, by nearly 8.0% of job seekers every quarter, Challenger, Gray notes.
Among the reasons might be the continuing sluggish economy, difficulty borrowing climate, lack of confidence among the unemployed and even recent job growth.
We are slowly coming out of the deepest recession this country has seen in decades. While some large and medium-sized companies are finally beginning to see the effects of an upturn, conditions are still very tough for small businesses and would-be entrepreneurs, says John A. Challenger, chief executive of Challenger, Gray amp; Christmas.
Many of the nations biggest banks still arent lending to small businesses, according to MultiFunding LLC. And credit cards and home equity are less available to provide cash for would-be startups than they were before the recession.
Lending is still extremely tight and for many of those wanting to start a business, funding the venture with credit cards or through a home equity loan are no longer viable options, he adds. Another reason start-up activity may be falling is that hiring is improving just enough to keep people on a more traditional employment path.
While net employment gains have been relatively small over the last 18 months due to continued layoffs, retirements and other separations, hiring levels are actually quite strong, he notes. The Bureau of Labor Statistics latest job openings and labor turnover survey reveals that employers hired nearly 12.2 million new workers during the second quarter; however, 12 million left jobs in that period.
When the recovery reaches the point when employers begin hiring, but the economy remains relatively fragile, we tend to see a drop in entrepreneurism as job seekers start to see success in their searches, Challenger says. As the economy continues to gain strength, start-up activity may begin to grow again, as conditions for such ventures become more inviting.
The Challenger survey is conducted quarterly among approximately 3,000 job seekers re-entering 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.
Click here to read Challenger Grays report.
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