The many layoffs of the Great Recession have prompted many individuals to set off on their own and start small businesses. The most recent data indicate that startup activity rose to record highs in 2008 and 2009, and in 2010 business formation remained at these elevated levels, with an average of 565,000 new businesses formed every month.
This is a 15 year high. On these surface, these numbers look very encouraging. Americans are standing up in the face of adversity and taking their futures in their own hands. Entrepreneurship is one of the foundations of the American dream, after all. However, one caveat is that most of these new businesses are in fact one-man-shops that aren't adding employees beyond the founder. The creation of employer firms has actually been on the wane. This has profound implications for the economy as new firms have historically been responsible for a disproportionate share of net new job creation.