Startup Activity Among Unemployed Hits 25-Year Low -- Lowest Level On Record

The number of unemployed managers and executives starting their own businesses fell to a record low in the first six months of 2011, according to a recent study by Challenger, Grey & Christmas, Inc. About 3.3 percent of job seekers decided to launch businesses, down from the previous low of 3.7 percent in the first half of 2010. In the second quarter of 2011, that startup rate hit its lowest level -- 2.5 percent -- since the survey originated in 1986.

"We are slowly coming out of the deepest recession this country has seen in decades. While some large and medium-sized companies are finally beginning to see the effects of an upturn, conditions are still very tough for small businesses and would-be entrepreneurs," John A. Challenger, CEO of Challenger, Gray & Christmas, said in a statement.

While the rate of startups among the unemployed was notably higher in the previous recession -- as high as 9.6 percent in 2002 -- Challenger pointed to lack of funds as a major obstacle in this recession. "Lending is still extremely tight and for many of those wanting to start a business -- funding the venture with credit cards or through a home equity loan are no longer viable options," he said. "Then there is the difficulty of finding customers. Even medium and large companies are having a hard time doing this, as consumers and businesses continue to keep a lid on spending."

It's not just the unemployed who seem turned off -- self-employment in general has decreased significantly during the recession. According to the U.S. Bureau of Labor Statistics, there were 8.6 million self-employed Americans in July 2011, compared to almost 10 million in June 2007, prior to the recession.

Despite the sobering numbers, Challenger remained optimistic. "As the economy continues to gain strength, start-up activity may begin to grow again, as conditions for such ventures become more inviting," he said.