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Kauffman Study: Weaker Entrepreneurship Spells Stronger Job Market

Apr 25, 2014

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Kauffman Study: Weaker Entrepreneurship Spells Stronger Job Market – Scan No. 8940

The U.S. saw slightly fewer businesses created last year, but there’s a silver lining: the poorer numbers nationwide likely indicate that a stronger job market relieved some of the pressure on people to start companies out of necessity.

That’s among the takeaways from the latest Kauffman Index of Entrepreneurial Activity, an annual study from the Kauffman Foundation.
An average of 0.28 percent of adults nationwide, or 280 per 100,000, started new businesses each month in 2013. That was down from 300 per 100,000 adults nationwide, or 0.3 percent, the previous year. The 2013 entrepreneurial rate is a return to the pre-recessionary level of 2006, which is more in line with historic rates, the study says.

The Kauffman study also found that 78.2 percent of new entrepreneurs last year had not recently been fired from a job, 4 percentage points higher than at the end of the recession in 2009. While it’s not a flawless link, the study says this measure can suggest that the overall jobs market is improving and forcing fewer people to take the entrepreneurial leap.

Entrepreneurship rates decreased across all U.S. regions last year, with the highest entrepreneurial activity in the West and the lowest in the Midwest. (It’s important to note that the study looks at manufacturing, construction, trade, services, and “other” industries—not just the high-growth tech companies often associated with entrepreneurship.)
Here are a few other notable nuggets from the Kauffman report:
—Last year, the most entrepreneurial activity happened in Montana (a rate of 610 new business owners per 100,000 adults), Alaska (470 per 100,000 adults), South Dakota (410), California (400), and Colorado (380). The states with the lowest activity were Iowa (110 per 100,000 adults), Rhode Island (140), Indiana (160), Minnesota (160 per), Washington (170), and Wisconsin (170).
—Of the 15 largest metropolitan areas, San Francisco had the highest entrepreneurial activity rate last year (0.57 percent), and Philadelphia had the worst (0.18 percent). Among other large metros, New York’s rate last year was 0.32 percent, Dallas was 0.33 percent, Houston was 0.34 percent, Boston was 0.25 percent, Detroit was 0.28 percent, and Seattle was 0.22 percent.
—Over the past decade, the largest increase in entrepreneurial activity came from a surprising place: Delaware, which nearly doubled its rate from 0.15 percent to 0.28 percent. Other relatively large entrepreneurial boosts over the past 10 years occurred in Massachusetts (0.08 percent), Nevada (0.08 percent), Alabama (0.08 percent), Florida (0.07 percent), California (0.07 percent), and New York (0.07 percent). The largest decreases occurred in Oregon (-0.11 percent), Iowa (-0.10 percent), Minnesota (-0.08 percent), and Wisconsin (-0.08 percent).
Jeff Engel