"During the Great Recession, more Americans have become entrepreneurs than at any time in the past 15 years."
That's the first line of a press release from the entrepreneurship specialists at the Kauffman Foundation. Sounds promising, right? I thought so, but from there, the news went downhill faster than a greased bowling ball on a ski slope.
The Kauffman release goes on to note that it appears that the economy and lousy job market have been pushing more people into entrepreneurship. The new "businesses" are really just self-employed people, rather than entities that could be a potential job source for others.
Not that this should be big news. Historical data seems to show that entrepreneurship tends to trend up with unemployment.
Source: The Kauffman Foundation and the U.S. Bureau of Labor Statistics.
The underlying data is also fairly highly correlated, and while that's hardly enough to definitively say that unemployment drives higher levels of entrepreneurship, it seems to be a good working thesis.
Other data from the survey further suggests that these are people scrambling for work, rather than following a driving passion to create their own business. Nevada and Georgia were the states with the highest level of entrepreneurial activity. Being a Nevada resident myself, I can't say I see it as a hotbed for promising startups. However, it is the state with the highest unemployment rate. Anecdotally, a few times a week I have somebody knocking on my front door offering car detailing, palm-tree trimming, or some similar service. Are these the new entrepreneurs?
Meanwhile, the entrepreneurship index was highest among the least-educated group, jumping from 0.49% creating a business per month in 2009 to 0.59% in 2010. The foundation also noted that the largest decrease in entrepreneurship occurred among high-school graduates.
Interestingly, we could probably pick out some corporate winners from this trend. Home Depot (NYSE: HD) and Lowe's (NYSE: LOW) could pick up business from self-employed contractors, all of whom will need tools and supplies. And warehouse chains like Costco (Nasdaq: COST) and Wal-Mart's (NYSE: WMT) Sam's Club tend to attract small businesses seeking to buy cheaply in bulk.
But the bigger picture here is still pretty lousy. It further reveals that the labor market's still difficult, and it could have longer-lasting impacts on the economy. Commenting on the current entrepreneurship trend, Kauffman CEO Carl Schramm said:
Far too many founders are choosing jobless entrepreneurship, preferring to remain self-employed or to avoid assuming the economic responsibility of hiring employees. This trend, if it continues, could have both short- and long-term impacts on economic growth and job creation.
I continue to believe that our economy is recovering. However, it seems like it could be a long while before we'll be able to say that the economy is recovered.
