Will the Recession Lead to More Entrepreneurship?

            The United States lost 2.6 million jobs in 2008, the greatest decline in annual nonfarm payrolls since 1945; meanwhile, the unemployment rate has crept up to 7.2 percent.  Later this week, the Bureau of Economic Analysis will release what most economists expect to be horrible gross domestic product figures for the fourth quarter of 2008.  In other words, the economic recession is severe, and the numbers appear to be bearing this out.

            Looking forward, though, we would expect for there to be more entrepreneurship taking place as a result of this economic downturn.  Much of that will be out of necessity; the talent pool of those who are being laid off is such that they are capable of selling those talents as their own boss, if they so choose.  Moreover, many of these individuals might have contemplated becoming self-employed for some time, but they were not willing to strike out on their own and forego the benefits of their existing jobs.  Unemployment changes that, providing an opportunity to pursue those dreams.  Looking back at past recessions, it is definitely true that smaller businesses were able to recover sooner than their larger counterparts.

            From my perspective, with the largest single concern from small business owners being poor sales, small business owners (both new and existing) will need a strengthened economy to flourish.  Even those who will use this time to their advantage, in other words, should hope for an economic recovery to prosper.  That is the biggest challenge of all right now.

— Chad Moutray, Chief Economist

4 Comments
  1. JDavid says

    The only answer to pulling us out of this recession is small business. Necessity is the mother of all invention, yes a cliche’ but it’s true.

    Those who have never been entrepreneurs will be forced to find something to generate income because looking for a job will not work in an environment where the typical employers are doing nothing but layoffs.

    To me this means great opportunity. We learn how to save, earn, and most important, create. Create a good or service that people actually want. Plus the quality goes up AND we learn how to manage finances all at the same time.

  2. Tim Berry says

    I think we’ve seen this in the past, that some of the people who’ve lost jobs create their own businesses as a result.

    However, it’s beginning to feel like this recession isn’t yet showing that kind of silver-lining growth in startups that has come with the clouds of previous recessions.

    While there should be necessity-sponsored startups (thanks JDavid) seems like they’re fewer and smaller because of the credit crunch, general confidence issues, etc.

    Seems like most indicators of startup action — take SBA-guaranteed loans, for example, as a tip-of-the-iceberg indicator — are as down as the stock market and house prices.

    I hope it gets better soon. Of course there are still opportunities all over, just less money, and, in general, lower sales are making it harder. But filling a need, giving people what they want, still works … right?

  3. SBACompanyOwner says

    SBA 8(a) business are being hammered, rules should change. A lot of Americans and companies are just trying to survive. People are getting laid off and companies are not spending. This recession will stop enterpreneurship, people would rather be employed in federal or state jobs from now on.

  4. Debt Settlement says

    There is certainly more entrepreneurship taking place as a result of this economic downturn, especially in my industry.

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