The U.S. economy has certainly recovered since the dark years of the recession, but the exact strength of the revival has been the subject of debate from politicians to pundits to economists for some time now.
Often, examining small business ownership trends can point the way toward a truer picture, with actual boots on the ground. With this in mind, the Kauffman Foundation’s lastest survey of main street entrepreneurship, out this week, is something to take a look at. Among other things, it sheds light on places where we seem stuck in reverse, and places where we aren't.
Typically, Kauffman focuses much of its research on startups, but its recent index delves into the lives of businesses that have existed for five years or more, and have 50 or fewer employees. Such businesses are critical to the economy because they make up about two thirds of all enterprises in the U.S., Kauffman says.
Yet the total rate of small business ownership, defined as the percentage of the population owning a business in a given month, has been dropping for decades, according to the report. It's true that the total rate of business ownership increased by a scant two tenths of a percent to 6 percent of the general population in 2014, equivalent to about 11 million businesses. But that’s more or less where the rate has been since the recession, and it’s still below pre-recession levels of more than 7 percent. (And the current rate is significantly below the 1990s, when businesses ownership was closer to 8 percent.)
Seeming to buck the trend, however, are micro-enterprises, defined as those with fewer than 10 employees, which are growing at a much healthier clip than their larger peers, according to the report. While the total population of main street businesses increased by 1.2 percent from 2014 to 2015, microbusinesses increased by 3.6 percent.
But even that kind of growth may not be all it’s cracked up to be.
Strangely, two not-so-rosy factors are likely to be contributing to the higher growth rate of the smallest businesses, says Arnobio Morelix, a report co-author. One reason is that businesses founded during recessions tend to stay smaller for at least the first 10 years of their existence. Owners might be overly cautious about taking on more employees and expanding.
Another reason is that more of the larger main street businesses are also shedding employees and becoming smaller companies.
“The number of established small businesses that are not micro-enterprises used to increase about the same rate or more than micro-enterprises in the past decades,” Morelix says. “However, they took a heavier hit during the immediate recession and post-recession years.”
Still, there are other reasons for optimism. As has been the case for years, non-native, or immigrant entrepreneurs have been steadily pulling a greater share of business growth. The rate of immigrant business ownership stands at 7.2 percent for 2014, compared to 5.8 percent for the native population. And immigrants are about 25 percent more likely to own a business than the native population, according to Kauffman.
Kauffman based its findings on the responses of a national sampling of 900,000 businesses from January through December of 2014. It also analyzed data from the U.S. Census Bureau, the Bureau of Economic Analysis, and the Bureau of Labor Statistics.