Business formation rates on the rise in spite of recession

Many economists say small businesses will be needed to lead the nation out of recession. With this in mind, it may come as good news that the Kauffman Foundation recently released a study revealing that 2009 saw a dramatic increase in business formation rates.

The Kauffman Index of Entrepreneurial Activity shows that in 2009, the number of U.S. adults who started businesses throughout the year saw a greater monthly increase than any other year. The number of business startups even exceeds those in the 1999-2000 technology boom.

Carl Schramm, president and CEO of the Kauffman Foundation, says these results do not surprise him. “Challenging economic times can serve as a motivational boost to individuals who have been laid off to become their own employers and future job creators,” he explains.

Moreover, Kauffman officials believe this is a good sign for the overall economy as the 2009 business incorporation trend may continue into 2010.

This is, indeed, likely good news for national recovery. The U.S. Bureau of Labor Statistics says sustained business formation is necessary to maintain economic recovery.