The most recent numbers out of the US Labor Department show the current unemployment rate at 9.7%, with a net 20,000 jobs lost in January, and 150,000 jobs in December. In total, the Labor Department estimates, the economy has shed a net 8.4 million jobs since December 2007, the official start of the recent recession.
Where are many of these unemployed people going with this unwanted change in their careers? For a growing number, it’s an opportunity to strike out on their own and hopefully, get off the wage-slave treadmill. A new study of 3,000 jobseekers shows a growing number of displaced managers and professionals are opting for the entrepreneurial route, pounding the pavements for clients versus pounding the pavements for another full-time job. Challenger, Gray & Christmas, an outplacement firm, says start-up activity among jobless managers and executives reached a four-year high in 2009. This is good news, since new business development is considered critical to a sustainable recovery.
Challenger says the percentage of unemployed workers starting their own business rose to an average of 8.6% in 2009. This is up 69% from 2008, when the start-up rate was just 5.1%, the lowest annual average in the history of the Index.
Another piece of interesting news is that most of the budding entrepreneurs were in the over-40 bracket. The Challenger survey finds that 88% of job seekers starting a business over the last two quarters were over 40. That was up significantly from the first half of the year, when the percentage of entrepreneurs over 40 averaged 72%.
This validates findings from a survey conducted last year by Ewing Marion Kauffman Foundation, which looked at the histories of 549 company founders and found they tended to act on their entrepreneurial impulses after the age of 40.
The biggest surge in entrepreneurial activity occurred in the third quarter of 2009, when 11.8% 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 start-up rate fell to 7.3 percent in the final quarter of the year, but this is not unusual. In fact, from 1999 through 2009, the percentage of job seekers starting businesses in the fourth quarter averaged 6.4 percent, nearly two percentage points lower than the 8.3 percent averaged in the first three quarters during the same time period.
John Challenger, chief executive officer of Challenger, Gray & Christmas, says entrepreneurship is an attractive option for many unemployed managers and professionals, despite difficulties in securing start-up financing:
“Rather than endure several more months of unemployment, as employers slowly move toward renewed hiring, many job seekers are opting to exit the labor pool and start their own firms. The start-up rate might have been even higher if banks had loosened their lending standards.”
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.
Challenger observes that “some of these older entrepreneurs serve as independent consultants and contractors, and often end up working on projects for their former employers. This arrangement is ideal for companies in this fragile economy. They are not quite ready to increase hiring, but they need people who know what they are doing to make sure projects are completed on time and at a high quality.”
