Whether it was a fresh startup or a fresh start, fewer Americans seemed willing to take career risks last year, according to a new report by Challenger, Gray & Christmas, a Chicago-based employment services firm.
The percentage of job-seekers starting their own businesses or relocating for new positions fell to historic lows in 2010, according to Challenger's quarterly Job Market Index, released Tuesday.
During the course of the year, an average 4.7% of unemployed managers and executives started their own firms. That's down from an average 8.6% in 2009, and is the weakest number since Challenger began tracking such data in 1986.
The previous record low for startup activity among job-seekers was recorded in 2008, when just 5.1% of former managers and executives started their own businesses. The Great Recession, which began in December 2007 and resulted in mass layoffs, has led to tightened credit markets, making it difficult for would-be entrepreneurs to start their own firms.
"This recession saw the near collapse of the banking sector," said Challenger CEO John Challenger, in a statement releasing the findings. "As a result, it was and still is, in some cases, very difficult to secure lending for new business ventures."
Weak Housing Market Hampered Job Relocation
The economic downturn, which can trace its roots to the nation's imploding housing market, also made it difficult for job-seekers to relocate to take new positions. Last year, an average 7.6% of job-seekers relocated each quarter for new positions, also a historic low. In 2009, the annual average relocation rate was 13.3%, while in 2008 it was 11.6%.
"Continued weakness in the housing market is undoubtedly a leading factor behind the decline in relocation," Challenger said, noting that recent reports suggest the situation may become even more dire.
Cities that once seemed immune to the collapsing housing market are now seeing prices starting to slump, according to a report Sunday in The New York Times. Once relatively stable housing markets, such as Seattle, Minneapolis and Atlanta, now report dramatic drops in home prices.
Seattle, for example, is down about 31% from its mid-2007 peak, and according to calculations by real estate website Zillow.com, it still has as much as 10% to fall.
Those kinds of price declines, which are happening around the country, are preventing job-seekers who own homes from relocating. Unable or unwilling to take a significant loss on their investment, many remain where they are.
"In a strong job market, where talent is difficult to find, employers might be more willing to help offset some of the financial loss associated with relocation," Challenger says. But in this early stage of the recovery, many companies are still looking to cut costs.
Some Conditions Are Improving
There's actually a little good news in this report because Challenger adds that some job-seekers aren't opting to relocate just yet in the hope that they'll find employment locally. And data showing improving job markets in many areas suggest they're right to be optimistic.
The latest report from the Labor Department showed that December unemployment rates fell in 238 of the 372 metropolitan areas the agency tracks, compared to a year ago. Additionally, 200 metropolitan areas reported year-over-year increases in nonfarm payroll employment.
Improvements in the job market may have also contributed to last year's lull in entrepreneurial activity, Challenger noted, especially in light of tight lending standards. With loans still hard to secure, many would-be entrepreneurs are abandoning their dreams of going it alone, opting instead for the security of full-time employment.
Labor Department data showed a decline in self-employment during the three months that ended December. The agency counted 8.8 million self-employed workers during the final months of 2010, compared to slightly more than 9 million during the same period in 2009.
What's Needed: Stronger Growth
As the economy and job market continue to improve, the U.S. could see an increase in self-employment. But right now, most job-seekers are eagerly snatching up the first stable position that comes along, putting their dreams of entrepreneurship on hold.
The same can be said for workers willing to relocate, Challenger noted. An improving economy may lessen the loss homeowners may have to take if they decide in the future to sell their homes for jobs elsewhere.
Further, Challenger said: "A stronger economy will also ease job-seekers' fears about relocating only to lose the new job after a short time . . . and being stuck in a new city without an established social or professional network."