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 2007 CPS data allow for an update to previous reports, with consideration of trends in the rates of entrepreneurial activity over the twelve-year period between 1996 and 2007. 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 2007 include:
- In 2007, an average of 0.30 percent of the adult population (or three hundred out of one hundred thousand adults) created a new business each month, representing approximately four hundred ninety-five thousand new businesses per month. This entrepreneurial activity rate is a slight increase over the 2006 rate of 0.29 percent.
- The entrepreneurial activity rate for men increased from 0.35 percent in 2006 to 0.41 percent in 2007. In contrast, the Kauffman Index for women declined from 0.23 percent to 0.20 percent.
- The entrepreneurial activity rate among Latinos increased from 0.33 percent in 2006 to 0.40 percent in 2007, the largest increase for any major ethnic or racial group.
- Non-Latino white and African-American business creation rates increased slightly from 2006 to 2007 (0.29 percent to 0.30 percent and 0.22 percent to 0.23 percent, respectively), and Asian entrepreneurship rates declined (0.32 percent to 0.29 percent).
- The immigrant entrepreneurial activity rate increased sharply from 0.37 percent in 2006 to 0.46 percent in 2007. In previous years, immigrants were more likely to start businesses than were the native-born; they are now substantially more likely to start businesses.
- The construction industry had the highest entrepreneurial activity rate of all major industry groups in 2007 (1.23 percent). The second-highest entrepreneurial activity rate was in the services industry (0.41 percent).
- The entrepreneurial activity rate increased in the Midwest and West from 2006 to 2007, but decreased in the Northeast. The entrepreneurial activity rate increased slightly in the South.
- The five states with the highest entrepreneurial activity rates were Idaho (460 per one hundred thousand adults), the District of Columbia (460 per one hundred thousand adults), Arizona (460 per one hundred thousand adults), Tennessee (440 per one hundred thousand adults), and Louisiana (440 per one hundred thousand adults). The five states with the lowest entrepreneurial activity rates were West Virginia (eighty per one hundred thousand adults), Alabama (one hundred per one hundred thousand adults), Delaware (140 per one hundred thousand adults), Pennsylvania (150 per one hundred thousand adults), and Ohio (190 per one hundred thousand adults).
- The states experiencing the largest increases in entrepreneurial activity rates over the past decade were Mississippi (with an increase of 0.14 percentage points), Hawaii (0.11 percentage points), Rhode Island (0.08 percentage points), and Massachusetts (0.07 percentage points). The states that experienced the largest decreases in their rates were Alaska (with a decrease of 0.25 percentage points), New Mexico (-0.22 percentage points), North Dakota (-0.17 percentage points), Kansas (-0.09 percentage points), and Nebraska (-0.09 percentage points).
- Among the fifteen largest MSAs in the United States, the highest entrepreneurial activity rates in 2006 were in Phoenix (0.58 percent), Riverside-San Bernardino (0.50 percent), Atlanta (0.48 percent), Los Angeles (0.44 percent), and Miami (0.41 percent). The large MSA with the lowest entrepreneurial activity rate was Philadelphia (0.11 percent).