Entrepreneurship Down, and Skewed to Low Income Areas

SBA and Kauffman Foundation studies both indicate that entrepeneurship trended down in 2008.    Business starts were down 14% in the third quarter of 2008 versus the same period a year earlier, Brian Headd, an SBA economist told the WSJ online.   According to Robert Fairlie, a University of California, Santa Cruz, economist, working with the Kauffman Foundation, the number of low income potential new businesses, such as baby sitting and house-cleaning services, grew in 2008, while those with higher income potential did not, suggesting that new business starts were driven more by necessity than opportunity.  The recession is taking its toll: according to a Federal Reserve July survey of 53 lending officers, “more than one third reported tightening terms for small-business loans in the prior three months, while only one reported easing terms.”