From the introduction:
The Kauffman Index of Entrepreneurial Activity is a leading indicator of new business creation in the United States. Capturing new business owners in their first month of significant business activity, this measure provides the earliest documentation of new business development across the country. Analysis of matched monthly data from the Current Population Survey (CPS) allows for comparisons of the percentage of the adult, non-business-owner population that starts a business over time. In addition to this overall rate of entrepreneurial activity, separate estimates for specific demographic groups, states, and select metropolitan statistical areas (MSAs) are presented. The Index provides the only national measure of business creation by specific demographic groups. New 2008 CPS data allow for an update to previous reports, with consideration of trends in entrepreneurial activity rates over the thirteen-year period covering 1996 and 2008. While the entrepreneurial activity rate has remained roughly consistent over the past decade, the Kauffman Index reveals important shifts in the demographic and geographic composition of new entrepreneurs across the country. Key findings for 2008 include:
- In 2008, an average of 0.32 percent of the adult population (or 320 out of 100,000 adults) created a new business each month, representing approximately 530,000 new businesses per month. This entrepreneurial activity rate is a slight increase over the 2007 rate of 0.30 percent.
- From 2007 to 2008, entrepreneurship rates increased for the lowest-income-potential types of businesses (120 per 100,000 to 130 per 100,000) and middle-income-potential types of businesses (110 per 100,000 to 123 per 100,000). For the highest-income-potential types of businesses, entrepreneurship rates decreased from 73 per 100,000 to 69 per 100,000, which may be due to early effects of the current recession.
- The entrepreneurial activity rate for men increased slightly from 0.41 percent in 2007 to 0.42 percent in 2008. The Kauffman Index for women increased from 0.20 percent to 0.24 percent, but the increase for women only returned entrepreneurship levels to where they were in the mid-2000s.
- The entrepreneurial activity rate among Latinos increased from 0.40 percent in 2007 to 0.48 percent in 2008, continuing an upward trend that started in 2005. Asian Americans also experienced a large increase in entrepreneurship rates, from 0.29 percent in 2007 to 0.35 in 2008.
- Non-Latino white business-creation rates increased slightly from 2007 to 2008 (0.30 percent to 0.31 percent), whereas African American rates declined slightly (0.23 percent to 0.22 percent).
- The immigrant rate of entrepreneurial activity increased from 0.46 percent in 2007 to 0.51 percent in 2008, further widening the gap between immigrant and native-born rates. Native-born rates increased only slightly, from 0.27 percent to 0.28 percent.
- The increase in entrepreneurship rates from 2007 to 2008 among immigrants was driven entirely by low- and medium-income-potential types of businesses. Immigrants, however, also are more likely to start high-income-potential types of businesses than the native born.
- While business-creation rates increased for less-educated individuals, the college-educated experienced a decline in entrepreneurial activity rates, from 0.33 percent in 2007 to 0.31 percent in 2008.
- The oldest age group (ages fifty-five to sixty-four) experienced the largest increase in entrepreneurial activity from 2007 to 2008 (0.31 percent to 0.36 percent), making it the age group with the highest entrepreneurial activity rate.
- The construction industry had the highest entrepreneurial activity rate of all major industry groups in 2008 (1.38 percent). The second-highest entrepreneurial activity rate was in the services industry (0.41 percent).
- The entrepreneurial activity rate increased in all regions from 2007 to 2008, except in the Midwest. The business-creation rate in the Midwest declined slightly from 0.25 percent to 0.23 percent.
- The states with the highest entrepreneurial activity rates were Georgia (590 per 100,000 adults), New Mexico (580 per 100,000 adults), Montana (530 per 100,000 adults), Arizona (490 per 100,000 adults), Alaska (440 per 100,000 adults), and California (440 per 100,000 adults). The states with the lowest entrepreneurial activity rates were Pennsylvania (140 per 100,000 adults), Missouri (150 per 100,000 adults), Wisconsin (170 per 100,000 adults), West Virginia (170 per 100,000 adults), Iowa (190 per 100,000 adults), and Ohio (190 per 100,000 adults).
- The states experiencing the largest increases in entrepreneurial activity rates over the past decade were Georgia (with an increase of 0.17 percentage points), Mississippi (0.12 percentage points), Massachusetts (0.09 percentage points), New York (0.09 percentage points), and Rhode Island (0.08 percentage points). The states that experienced the largest decreases in their rates were Alaska (with a decrease of 0.23 percent percentage points), North Dakota (-0.19 percentage points), New Mexico (-0.18 percentage points), and Iowa (-0.13 percentage points).
- Among the fifteen largest MSAs in the United States, the highest entrepreneurial activity rate in 2008 was in Atlanta (0.74 percent). The large MSA with the lowest entrepreneurial activity rate was Philadelphia (0.16 percent).