The Kauffman Foundation cross-examined data from the U.S. Census Bureau, Fortune 500, and Inc. magazine to figure out how recessions affected new firm formations.

The study found that in general, bad economic times for the nation may not always impact entrepreneurship in the same way. After all, an individual may feel more apt to start a business once laid off, while entrepreneurs could target the newly unemployed as potential new hires.

Around 51 percent of Fortune 500 companies formed during such times, by comparing their founding years to expansion and contraction dates recorded by the National Bureau of Economic Research (NBER). That percentage jumps to 57 percent when excluding companies founded before 1855 – when NBER started tracking economic cycles.

A good portion of the most famous examples – Sears, 3M, Ford, General Electric – all rose during the Second Industrial Revolution, though this time was surprisingly riddled with economic contractions, the study said.

Current times, however, also may not be no more or less favorable for entrepreneurship than the past. Whether they are born in 1977 or 2001, the rate that new firms survive from age one to age five has remained remarkably similar, despite changing economic conditions.

More information about The Kauffman Foundation’s findings can be found in the study, “The Economic Future Just Happened.”

On the Ground Below

The Bureau of Labor Statistics, National Retail Federation, and Census Bureau released reports indicating that wholesalers and retailers are still adjusting to the economic climate, as price indexes continued to fall:

• Retail container traffic fell in November for the 16th month in a row. With this finding in mind, the National Retail Federation maintains its hypothesis that 2008 will be the slowest year for traffic since 2004, with a year-to-year decline of 7.1 percent.

• U.S. wholesalers lowered their inventories by 1.1. percent in October, though sales also dropped by 4.1 percent from the previous month, according to a Census Bureau report released Wednesday.

• As reported today, wholesale prices of finished goods dropped by 2.2 percent in November, following monthly declines of 2.8 and 0.4 percents.

The Cloud of Consumer Pessimism

As these prices fell, a few research groups found record retail sale declines last month. The International Council of Shopping Centers even deemed Black Friday and the following weekend’s shopping days a “poor start to the holiday season sales,” as it observed a year-to-year decline of 2.7 percent.

The cause of these sales declines: a hibernating consumer, hiding from any temptations to spend money this holiday season:

• The ABC News Consumer Comfort Index measured record-low levels of confidence for the fifth week in a row, as reported on Tuesday. According to the poll, 92 percent of consumers surveyed said the nation’s economy is in bad shape, while 79 percent of them rated today’s buying climate negatively.

• Perhaps as a result, shopping ranked second only to dining out as one of the top activities consumers planned to decrease, according to a poll by the National Association of Television Program Executives and E-Poll Market Research. About 35 percent of consumers also said they planned to stay local more in their socializing, if not at home. They may also hesitate to buy any gifts full price this holiday season – though they were also willing to splurge on themselves, as Women’s Wear Daily reported.

Attempts to Find a Silver Lining

Meanwhile, researchers are taking such economic and behavioral conditions in mind, in trying to find positive news within it all.

• Some, like MasterCard’s SpendingPulse, traced the origins of rising consumer pessimism back to the ongoing depreciation of petroleum, as wholesale prices for it and petroleum products dropped by 11.2 percent last month.
  The research group reported yesterday a 3.8 percent decrease in total retail sales, excluding auto purchases – the biggest month-to-month decline it has ever measured. The caveat: without the rapid decline of gasoline purchases factored in, retail sales growth would have otherwise remained relatively flat.

• In its latest study, the Kauffman Foundation posed to question whether recessions were a good time to start a new business.
  The study, examining entrepreneurship up till 1975, did not reveal anything too conclusive, as the research group found a number of other factors that had to be considered. The research group also acknowledged that potential entrepreneurs would be unwilling to leave their jobs to found companies during recessionary periods.
  However, when the study excluded the Great Depression and World War II – the most unusual periods of time – the Kaufmann Foundation found that slightly more companies debuted during recession periods than expansion periods.

Overall, this week’s numbers showed that consumer pessimism remains persistent as retailers and wholesalers continued adjusting to the economic environment. Whether such feelings or downturn behavior will fade first, time has yet to tell. But either way, as the next few weeks pass by, and as the new year approaches, new perspectives could perhaps lead to new solutions – or, at the very least, a break in the cloud.

Furthermore, they say that the emergence of start-up businesses could jump-start an economic upturn as they create jobs nationwide – that is, if such businesses strive for innovation, rather than mere economic survival.

The Global Entrepreneurship Monitor, an international research firm, found that more than 61 percent of businesses in 2007 were start-ups – an 8.6 percent decline from 2006, and a nearly 10 percent decline from 2005. It attributes such a drop to the great rise and fall of the housing market, which began in 2001 and ended in 2006.

During that same time period – with the unemployment rate peaking at 5.3 percent, and up to 71 percent of industries losing jobs – entrepreneurship generally declined as unemployment rose, according to the Global Entrepreneurship Monitor report. In addition, all of the net job growth from 1980 to 2000 came from firms less than five years old. Older firms, on the other hand, lost jobs.

Future economic growth relies upon such creation and destruction of jobs – as seen in 2007, when service-providing startups made up more than 75 percent of total job creation and losses, according to the Kauffman Foundation. And while new firms may not initially bring in a high amount of new jobs, over a few years they create new jobs, in addition to innovative goods, services and processes.

The research foundation’s latest report ranked Massachusetts, Washington state, Maryland, Delaware, and New Jersey as the nation’s most prepared for the future, or “the new economy” in summation. With this, companies of any industry should fare well if they embrace new technologies and business models, especially in an economic environment bound only to get more competitive.

The foundation also recommends that new businesses not be entirely inclusive and removed from other sectors of industries. Rather, future success “requires that a whole array of institutions – universities, school boards, firms local governments, economic development agencies – work in new and often uncomfortable ways,” especially with a growing global economy.