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U.S. Startup Activity Finds No Traction; Sales, Staffing Low

Investor’s Business Daily (05/22/12) Jason Ma

Entrepreneurial activity in the U.S. is showing signs of deterioration, from startups to the self-employed, with entrepreneurs as a group appearing less likely to boost hiring. The number of startups with a payroll is the smallest in decades, and businesses staffed only by the owner are investing even less than in prior years.

Establishments less than a year old totaled 556,553 in 2010, according to the latest U.S. Commerce Department data, down 26% from the peak of 747,278 in 2006, and the lowest level since 1983, despite a 46% increase in the total number of establishments since then. Previous postrecession recoveries showed sharp increases. Startups are also smaller now than in prior years. By various measures, startups’ staffing has been trending lower for more than 10 years. Average employees at new establishments dropped from 10.8 workers in 2002 to 7.7 in 2010, according to Commerce Department data.

The booming mobile apps market has given rise to one-person companies consisting of a lone programmer, notes William Dunkelberg, chief economist at the National Federation of Independent Business. Technology has also reduced the need for staff for record-keeping, administration, and accounting, he adds.