With early signs of a recovery, the start-up activity among jobless managers and executives has reached a four-year high in 2009. It is also expected that the momentum established in the second half of 2009 will carry into 2010 as new business development is considered critical to a sustainable recovery.
The percentage of unemployed workers starting their own business rose to an average of 8.6 percent in 2009, according to the latest Challenger Job Market Index released Monday by global outplacement consultancy Challenger, Gray & Christmas. The 2009 average is up 69 percent from 2008, when the start-up rate was just 5.1 percent, the lowest annual average in the history of the Index.
"Most signs indicate that the recession ended as the summer got underway. However, the recovery has yet to reach the job market, where unemployment remains near 10 percent and the number of Americans experiencing long-term joblessness lasting six months or longer is at a record high. The combination of the improving economy and stagnant job market may have contributed to the surge in start-up activity among job seekers over the summer," said John A. Challenger, Chief Executive Officer of Challenger, Gray & Christmas.
The biggest surge in entrepreneurial activity occurred in the third quarter, when 11.8 percent of job seekers started their own firms. The biggest surge in entrepreneurial activity occurred in the third quarter, when 11.8 percent of job seekers started their own firms. That was the highest quarterly figure since the second quarter of 2005, according to the Challenger Index, which is based on a quarterly survey of approximately 3,000 job seekers in a variety of industries nationwide.
The biggest gains in self-employment occurred among those 55 and older. The ranks of self employed among those 55- to 64-years-old and those 65 and older grew by 93,000 and 213,000 respectively. In contrast, the number of self-employed 35- to 44-year-olds shrank by 70,000. Meanwhile, the population of 45- to 54-year-old entrepreneurs fell by 60,000 in 2009. In the Challenger survey, the portion of job seekers starting a business who were over 40 averaged 88 percent over the last two quarters. That was up significantly from the first half of the year, when the percentage of entrepreneurs over 40 averaged 72 percent.
However, the percentage of small and independent business owners who reported difficulties in arranging credit in December was at its highest level since 1983, according to the latest monthly survey by the National Federation of Independent Business (NFIB). Despite the continued difficulty in obtaining loans, confidence among these business owners increased in the second half of the year. The NFIB Optimism Index averaged 88.2 (on a scale of 100) over the last six months of 2009, up from a monthly average of 85.2 in the first half of the year. The difficulty in obtaining credit was not a deterrent for many of those who wanted to be their own boss. In addition to Challenger data, government data also showed an increase in self employment.
"Entrepreneurship used to be thought of as a young person's endeavor, as it requires a significant amount of energy and drive. The myth that older entrepreneurs lack these qualities has long been shattered. In fact, seasoned professionals have a decided advantage over their younger counterparts. They not only have the energy required for entrepreneurship, they have the experience, communication and technology skills and a strong network of business connections," said Challenger.
