US entrepreneurship declines in 2015, reversing 4 years of upward growth

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As optimism on Main Street remains stagnant, a new report finds U.S. entrepreneurial activity fell in 2015, reversing four years of upward growth.

According to the Global Entrepreneurship Monitor 2015 U.S. Report released by Babson College on Tuesday, total entrepreneurial activity in the U.S. fell 2 percentage points last year, sliding from 14 percent in 2014 to 12 percent in 2015. This indicator measures those starting and running new businesses.

Researchers pointed to a drop in “nascent activity,” meaning that fewer people overall entered into entrepreneurship in 2015. The report underscores the idea that a Main Street post-recession recovery is still a work in progress, with sentiment and overall levels of entrepreneurship potentially wavering.

The number of Americans who see opportunities to launch new businesses also fell from a high of 51 percent in 2014 to 47 percent in 2015, meaning the group is motivated but seeing fewer opportunities to start businesses. Sixty-nine percent of those who did launch businesses were motivated by the pursuit of opportunity and independence.

The report is part of a global survey that has more than 200,000 respondents annually.

“It could be that people have good jobs and don’t feel motivated to go out and start businesses,” said Babson professor Donna Kelley. “But this is an indicator to watch. If the general environment is saying that there are few opportunities and the entrepreneurship rate goes down, that all suggests less optimism about entrepreneurship right now.”

Another widely watched report from the Kauffman Foundation found that entrepreneurial activity rose in 2014, reversing a four-year downward trend. The two reports monitor entrepreneurship differently, however. Babson researchers monitor individuals starting companies while they are still employed, as well as part-time entrepreneurship, which may account for some of the discrepancy in trends. Kauffman has yet to release its report for 2016, which will highlight 2015 trends.

Kelley notes the Babson report could highlight entrepreneurship coming off a post-recession high, which could signal more “caution or realism.”

Overall, entrepreneurship peaks among people ages 35 to 44 at 17 percent, the report found. Since 2001, the rate of men’s entrepreneurship has been 1½ times that of women’s, and both men (15 percent) and women (9 percent) saw entrepreneurial activity declines of 2 percentage points in 2015 from the previous year.

African-Americans had the highest entrepreneurial activity rate at 14 percent, followed by Caucasians at 12 percent, according to the report.

The study comes at a time when optimism on Main Street has been somewhat stagnant, according to a separate but closely monitored report from the National Federation of Independent Business. The Small Business Optimism Index has been trending somewhat higher since the Great Recession, but has been holding below the report’s 42-year average of 98. Economic and political uncertainty are frequently cited issues, as are regulatory concerns and an inability to find skilled workers.

The new findings are not “necessarily surprising,” said Molly Day, vice president of public affairs for the nonpartisan advocacy group the National Small Business Association.

“In looking at some of the recent data we have seen, small businesses are not super optimistic right now,” Day said. “Regulatory hurdles are significant, and health-care reform in particular is something they consider greatly” before deciding to launch a new business.

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