Thursday, January 15, 2009

Start-Ups are the Engines of Employment

I've been working with entrepreneurs since the beginning of the last big recession in the early 1990s. I learned back then that start-ups are the engines of employment growth in our nation. This article in Forbes shows that this concept remains true.


"Entrepreneurs
Employment Engine
Melanie Lindner, 01.14.09, 3:10 PM ET

The U.S. economy shed 2.6 million jobs last year--524,000 since Thanksgiving. With any luck, start-up companies will benefit from the sudden tsunami of talent.

Between 1980 and 2005, private sector start-ups accounted for 3% of employment per year, according to Business Dynamics Statistics, a U.S. Census Bureau study (funded by the Ewing Marion Kauffman Foundation) released Wednesday.

While 3% sounds like a drop in the bucket, the number is actually quite significant when compared to the 1.8% average annual net employment growth for the same period. That means that, excluding jobs created by new firms, established U.S. companies tend to lose more jobs than they create. "Micro firms" (those with one to four employees) account for a whopping 20% of new jobs created in any given year.

Will new entrepreneurs thrive in this recession? While the answer clearly differs by industry, the data suggest that the overall number of start-ups only mildly declines during downturns; encouragingly, it spiked during the recession in the early 1980s.

For a closer peek at the data, check out ces.census.gov. And for a look at 10 entrepreneurs who managed to launch future empires atop the shards of devastated economies over the last 200 years, check out "Entrepreneurs Who Rose From The Ashes.""



(http://www.forbes.com/entrepreneurs/2009/01/14/startup-unemployment-economy-ent-fin-cx_ml_0114startupdata.html?partner=smallbusiness_newsletter)





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