Startups plummet in 2010

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The ranks of entrepreneurs took a dive during the first half of 2010. A survey of job seekers by the outplacement firm of Challenger Gray & Christmas showed that an average of 3.7 percent of respondents decided to start a business in the first half of 2010, down from 7.6 percent during the same quarter last year.

Tight lending markets, uncertainty over the sustainability of the economic recovery or a job offer from an employer were among the reasons given for postponing business startups. 

The 3.4 percent startup rate in the first quarter and the 3.9 percent rate in the second quarter of 2010 represent the lowest two-quarter average on record, since Chicago-based Challenger began tracking startups in 1989. The highest two-quarter average occurred in the first half of 1989, when 21.5 percent of job seekers ended up starting businesses.

The figures are part of the Challenger Job Market Index, a quarterly survey of 3,000 job seekers, many of whom were former managers and executives. While it’s difficult to pinpoint an exact reason for the drop, John A. Challenger, the company’s CEO, said in a statement that “it could be that the job market has improved to the point that many do not feel compelled to take the risk of going it alone.” 

On the other hand, he noted that the fragility of the recovery also may be a factor. “Many small business owners are increasingly pessimistic about business conditions and still find it difficult to get a loan,” Challenger said.


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