Startup rate at 15-year high

By Catherine Clifford, staff reporter


NEW YORK (CNNMoney) -- Necessity is the mother of invention: In this economy, if you can't find a job, make one.

That seems to be the strategy of many people lately: The percent of Americans starting businesses in 2010 and 2009 was the highest in 15 years, according to a report from the Kauffman Foundation released Monday.

Last year, 340 of every 100,000 adults launched a business each month, creating 565,000 startups monthly, the report found. That was the same percentage as 2009, when 558,000 new businesses a month were created.

Continued high unemployment as a result of the Great Recession is driving the trend, according to Kauffman.

The rate of business creation has been steadily rising since 2006, Kauffman found.

More start-ups, however, don't necessarily mean more job opportunities.

"Individuals are starting businesses partly out of desperation," said Robert W. Fairlie, author of the report and professor of economics at the University of California, Santa Cruz. "And if you are going to start a business in those conditions, then it is probably not the best idea to start one hiring employees."

Indeed, the percent of Americans who created businesses that have employees has been falling steadily since 2007: The rate now is 100 in 100,000, down 23% from three years earlier.

"Far too many founders are choosing jobless entrepreneurship, preferring to remain self-employed or to avoid assuming the economic responsibility of hiring employees," said Carl Schramm, president and CEO of the Kauffman Foundation, in a written statement.

Who is starting what: Immigrants -- particularly Latinos -- were more likely to start their own businesses compared to Americans born in the U.S. The entrepreneurial activity rate for Latinos last year was 560 per 100,000, twice as high as for Americans born in the U.S.

High school dropouts also had a high rate of entrepreneurship. The rate rose 20% last year to 590 per 100,000, "suggesting an increased number of people entering entrepreneurship out of necessity," the report says.

The construction and service industries had the highest startup rates; manufacturing had the lowest.

Nevada and Georgia had the highest rate of entrepreneurial activity (510 per 100,000 adults), while West Virginia had the lowest (170 per 100,000).

The Kauffman index measures the percent of people age 20 to 64 who start a business each month with 15 or more hours worked. To top of page

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