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Would-be Entrepreneurs Take It on Chin in Fragile Economy

Would-be Entrepreneurs Take It on Chin in Fragile Economy . / Credit: Boxer image via Shutterstock

There's nothing like being unemployed to make a person's entrepreneurial genes kick in. But the fragile economy and skittish job market combined to deliver a one-two punch that sent entrepreneurial wannabes to the canvas this past year. Startup activity among unemployed managers and executives failed to rebound in the second half of 2011 from the record lows of the first half of the year, a new survey shows.

Over the last two quarters, 3.2 percent of jobless managers and executives started their own business, compared with 3.3 percent during the first two quarters, according to survey results from Challenger, Gray & Christmas, an outplacement consultancy.

The pace of startup activity in the last half of the year was down significantly from the same period in 2010, when nearly 6 percent of managers and executives started their own businesses.

Even in 2001, amid the dot.com collapse that was particular devastating to recent startups, entrepreneurship was pursued by an average of about 8 percent of job seekers every quarter. 

Over the past eight quarters, the average startup rate has been 3.9 percent — less than half the 2001 average, the Challenger survey found.

[Entrepreneurs Are Made, Not Born, Says New Survey]

"While big business definitely began to reap the benefits of the recovery in 2011, conditions were not nearly as fruitful for existing small business, let alone those attempting to get up off the ground," said John A. Challenger, chief executive of the Chicago-based consultancy. "Credit was still very difficult to come by, and demand for products and services remained soft.  Basically it was not a very inviting environment for would-be entrepreneurs."

We're now at a point in the recovery where employers are beginning to hire again, but the economy remains relatively fragile, Challenger added.

"In this environment we tend to see a drop in startup activity, as job seekers are more comfortable with the relative stability of traditional employment as opposed to the uncertainty of entrepreneurship," he said. "As the economy continues to gain strength, startup activity may begin to grow again."

Reach BusinessNewsDaily senior writer Ned Smith at nsmith@techmedianetwork.com. Follow him on Twitter @nedbsmith.

Ned Smith
Ned Smith

Ned was senior writer at Sweeney Vesty, an international consulting firm, and was Vice President of communications for iQuest Analytics. Before that, he has been a web editor and managed the Internet and intranet sites for Citizens Communications. He began his journalism career as a police reporter with the Roanoke (Va.) Times, and was managing editor of American Way magazine and senior editor of Us. He was a Captain in the U.S. Air Force and has a masters in journalism from the University of Arizona.

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