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5/28/15

Report: US startup activity heads higher for the first time since 2010

Some apparent good news regarding America’s entrepreneurial dynamism — and the health of the US economy. The Kauffman Foundation’s Index of Entrepreneurship — which incorporate factors such as the monthly share of adults starting a business and the share of new entrepreneurs driven by “opportunity” versus “necessity” — has reversed a multi-year downward trend. From a new report:

Reversing a downward cycle that began in 2010, U.S. startup activity ascended last year, according to the 2015 Kauffman Index: Startup Activity. National business creation findings were released today, and state and metropolitan data will be released June 4. Over the past two decades, the Startup Activity Index generally has risen or fallen in tandem with the business cycle – up in the 1990s expansionary period and plummeting as the Great Recession took hold. The entrepreneurial activity increase in the 2015 Index represents the largest year-over-year increase in the last two decades, giving rise to hope for a revival of entrepreneurship; however, the return remains tepid and well below historical trends. 

In the 2015 Index, 310 out of 100,000 adults, or 0.31 percent, started new businesses each month, on average. In the 2014 Index, the average was 0.28 percent of the adult population. “This rebound in entrepreneurial activity lines up with the strength we’ve seen in other economic indicators, and should generate hope for further economic expansion,” said Dane Stangler, vice president of Research and Policy at the Kauffman Foundation. “But, it’s important to view this short-term uptick in context of the bigger picture – we are still in a long-term decline of activity, which affects job creation, innovation and economic growth.”
Opportunity entrepreneurs, those who were not unemployed and not looking for a job before they started their new ventures, was 79.6 percent of the total number of new entrepreneurs. This number represented an increase over the 2014 Index, and was substantially higher than in the 2010 Index, when the number of opportunity entrepreneurs was at the lowest rate since the Kauffman Foundation began collecting this data in 1996.  “Startup density, or the number of new employer businesses by total population, increased from 128.8, or 128.8 for every 100,000 people, to 130.6 in the Startup Activity calculations from 2014 to 2015. Though startup density is climbing, it remains well below typical historical rates.
Good news. But I would also like to know more about what kinds of businesses are being started and why. How many businesses are being created with the hopes of becoming very big and very profitable? The Kauffman study notes “it is impossible to cleanly disaggregate between the creation of high-growth potential businesses and individuals starting businesses because of limited job opportunities.”
But the index tries to get at that  issue by examining the share of new entrepreneurs coming out of unemployment versus to the share of the new entrepreneurs coming out of “wage and salary work, school, or other labor market statuses.” That refers to the “opportunity” versus “necessity” distinction I mention above. The study notes, however: “The distinction is not perfect because many successful businesses are created by people who have lost their jobs and are unemployed, but the distinction offers at least some suggestive evidence on the influence of economic conditions on overall business creation.”


from AEI » Latest Content http://ift.tt/1ezSyal

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