For the first time in five years, the rate of new business startups rose in the United States, according to a new report from the Kauffman Foundation, a national entrepreneurship nonprofit. Startup activity saw the largest annual increase in 20 years.
The rise in entrepreneurship is an important sign of economic recovery. Most entrepreneurs leave employment to take a risk on their own business. More willingness to take that risk shows that entrepreneurs have more confidence in the economy.
"New and young firms are the principal sources of net job creation in the United States," wrote Dane Stangler, the Kauffman Foundation's vice president of research and policy. "Entrepreneurship in all its forms will continue to be essential to rising standards of living and expanding economic opportunity."
Eighty percent of new entrepreneurs previously held jobs — more than last year but still lower than historical norms. There are now 310 entrepreneurs for every 100,000 adults in the U.S., which translates into 530,000 new business owners every month, the report says.
Immigrants are almost twice as likely as native-born Americans to start new businesses. Immigrants' rate of entrepreneurship is 0.52 percent, compared to the native-born rate of 0.27 percent.
Veterans are making up a smaller portion of the entrepreneur population, but the report attributes that to a declining number of veterans.
The Austin, Texas, metropolitan area ranks first in the nation for startup activity, followed by Miami, Fla., and then San Jose, Calif. Pittsburgh is last in the nation. Washington, D.C., ranks 30 out of the 40 metropolitan areas measured.
The report encouraged several policy reforms to increase entrepreneurship: welcome immigrants, encourage competition and remove barriers to startups, such as occupational licensing.
Men are more likely than women to start businesses, making up 63 percent of new entrepreneurs. At 37 percent, the share of entrepreneurs who are women is approaching historical lows, having fallen from 44 percent in 1997.
The report was authored by economist Robert Fairlie and Kauffman Foundation researchers Arnobio Morelix, E.J. Reedy, and Joshua Russell (of no relation to this writer).