Economists, politicians, and investors are all keeping a close eye on unemployment numbers--a key benchmark in determining the overall health of the economy. Of course, unemployment has a variety of effects, none of which are particularly good, but I think the recent spike in unemployment is different from typical unemployment in two main ways.
First off, the spike was huge. In April, unemployment in the United States rose to a massive 19.7 percent, meaning about one in five people was out of work.
And second, it might be temporary. Most lost jobs were associated with the direct and indirect consequences of the Covid-19 pandemic, leading many experts to believe this spike in unemployment is temporary. There's early evidence to suggest this might be the case, with unemployment falling to 16.3 percent in May, and 11.1 percent in June.
Millions of people are currently relying on emergency small-business funds, unemployment benefits, or a combination of these and other programs to stay afloat during these uncertain times. So what does this mean for the world of entrepreneurship? I believe we'll see higher interest in entrepreneurship and better opportunities for current entrepreneurs.
First, it's important to acknowledge that two people who are unemployed aren't necessarily going to have the same overall experience. Unemployment laws vary wildly from state to state, so someone filing for unemployment in New York is going to have a much different time than someone filing in Wyoming.
On top of that, people handle unemployment differently. For some, it's a temporary predicament not worth worrying about; they breeze through the experience, and start looking for a new job as soon as they can. For others, it's borderline traumatizing; they worry they're never going to work again, and may suffer from prohibitive mental and emotional effects.
That said, here's a handful of effects that I predict will emerge from spiked unemployment.
First, I believe we can count on a new wave of entrepreneurial interest. Millions of people lost their jobs and likely felt helpless to do anything about it; they weren't in charge of making those decisions, and had no control over their situation. It's reasonable to assume that many of these people will be motivated to pursue a career path that imbues them with more autonomy. They want to be the ones making the decisions, and they want more control over their economic future.
I think entrepreneurship is the only real path to achieve these goals. Starting your own business gives you the power to control your own income, and adapt to new circumstances as they arise. Among people who start small businesses, 55 percent cite their biggest motivation in opening a business was being their own boss--and getting to make those important decisions, rather than being subject to the whims of others.
The Covid-19 pandemic has changed our way of life, at least temporarily. Even major corporations like Microsoft, Google, and Twitter made a bold transition to encourage employees to work from home. Remote work is being taken more seriously, and people are becoming more comfortable with the concept. Additionally, people are finding ways to entertain themselves within the home because of social distancing guidelines.
This presents many new opportunities for entrepreneurs looking to solve a problem. Today, it's possible to start a full business, with employees, entirely from your home office. And with so many people adapting to new and unusual circumstances, there are plenty of new problems to be solved.
On top of that, if you're unemployed, you've got extra time on your hands--which you can use to learn a new skill, research a specific problem, or build a product that people will want to buy.
It's also worth noting that you can count on a readily available workforce if you need to hire employees. With millions of people out of work and looking for new opportunities, it shouldn't be hard to find people with the right skills (or at least the right attitude) to help your business grow.
One final effect worth considering: More than 100,000 small businesses have closed permanently because of the pandemic. Those entrepreneurs will likely be interested in starting new businesses to replace them. Even if they don't, there will be room for new entrepreneurs to move in.