Company startup rate falls to record low in US: report

The rate of new company creation in the United States dropped to a record low in 2010, according to a survey by the US Census Bureau's Center for Economic Studies and the Ewing Marion Kauffman Foundation.

Researchers found the business startup rate fell to 7.87 percent, Reuters reported. It’s the first time it’s dipped below 8 percent. The startup rate was at its highest in 1987, when it was 13.02 percent.

New firms as a percentage of all firms also decreased in 2010, the data, published on Wednesday, show. New companies – defined as firms less than five years old – were 35 percent of all companies in 2010, down from 49 percent in 1982, CNN reported.

Only 12 percent of US employment in 2010 was at new companies, compared with 20 percent in the 1980s, Reuters reported.

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"There are a lot of questions as to why the economy has been slow coming out of the recession, and it is possible that some of that could be explained by the decline in the trend of startups and new firms in the US economy," Javier Mirada, principal economist at the Center for Economic Studies, told Reuters.

Researchers found that in 2010, 394,000 startup businesses created 2.3 million jobs while the private sector shed 1.8 million jobs overall, the Associated Press reported.

"If we are to achieve and sustain a hearty recovery, policymakers, educators and organizations that help entrepreneurs commercialize their technologies must be willing to address every obstacle that stands in the way of new business formation," Robert Litan, vice president of research and policy at the Kauffman Foundation, said in a statement.

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