Stay Informed!

By Sarah Schaefer on 05/17/2011 @ 11:30 AM

Tags: Entrepreneurship

Today is the second installment in a series of posts about entrepreneurship in recognition of National Small Business Week. Click here to read and leave comments on yesterday’s post about startups and job creation.

Myth #2: Few people start their own business during recessionary periods

There’s no doubt that starting a small business has risks – as anyone who has created their own enterprise can tell you, self-employed people always face a number of challenges. As a result, you would think that few people start their own business during a recession. However, in 2009, the self-employment rate actually increased to its highest point in 14 years. Although the self-employment rate decreased slightly in the last three quarters of 2010, this may indicate that self-employment and startup businesses are actually more resilient to economic downturn than traditional wage-earner jobs, and can be viewed as a shock absorber during periods of high unemployment.

To be sure, the number of startup businesses decreased in the most recent recession. However, between 2007 and 2009, the number of self-employed declined by about 760,000 (Hipple, 2010) while the economy as a whole lost an estimated 8.1 million jobs.

Furthermore, times of economic recession may actually encourage entrepreneurship. When unemployment levels rise, newly laid off individuals may turn to self-employment because they have no other alternative. This group of “necessity” entrepreneurs is demographically diverse – African-Americans and older individuals were well represented among them.

Has the recent economic downturn led you to try your hand at entrepreneurship? Share your story below and be sure to check the blog tomorrow for our next myth about self-employment!

National Small Business Week, May 16-20, 2011, celebrates the contributions of small businesses to the economic well-being of America. CFED would like to thank our sponsor, Sam’s Club Giving Program for its commitment to help start and grow small businesses and for its support of the Self Employment Tax Initiative. To find out more about National Small Business Week, click here. To find out more about how Sam’s Club is helping small businesses, click here.

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