Despite Small Biz Gains, Unemployment Rate Hits 5.1 Percent

April 8, 2008

The Department of Labor's (DOL) Bureau of Labor Statistics (BLS) released its latest report on the U.S. unemployment rate. For the third consecutive month the U.S. economy has seen an increase in the unemployment rate, exacerbating the uneasy feeling many have about a potential recession on the horizon. According to the BLS April 4 report, the U.S. economy shed 80,000 jobs in March 2008 pushing the unemployment rate up to 5.1% -- the highest rate since the aftermath of Hurricane Katrina in September 2005.

Many economists were already bracing for a poor report, and the chairman of the Federal Reserve, Ben S. Bernanke, told Congress earlier this week that the labor market would continue to soften. While the drop was worse than many economists had feared, of greater concern was the unforeseeable data released about payroll information. According to the BLS, payrolls fell in January and February, and in the most recent report, DOL revised those declines to be even greater. Employers cut 76,000 jobs each of those months, far more than originally estimated.

Many economists agree that the employment report is considered the most important monthly indicator of the health of the economy. After viewing the dismal results from BLS's latest report many economists agree that the all indicators point to the US economy already being in the midst of a recession.

While a significant uptick in the nations unemployment rate does not constitute good news, the small-business community is poised to be the source of new firms and new jobs. According to the March 2008 ADP Employment Report, compiled from the payroll service firm's survey of private sector employers, small-business with fewer than 50 workers added 55,000 jobs in March. Large businesses, on the other hand, cut 52,000 jobs.

With unemployment on the rise, more and more people will look to entrepreneurship as a meaningful way to make a living.

This is not a new trend, according to Dr. Shane A. Scott, Professor of Economics and Entrepreneurship at Case Western Reserve University, "Why? Because they have less to lose by becoming entrepreneurs, something economists call a lower opportunity cost on their time."

If Scott's assertions are correct, America's small-business community stands to welcome many new entrepreneurs among its ranks, which will no doubt help the US economy recover. This expected upsurge in entrepreneurship makes it absolutely crucial to have government policies that foster entrepreneurial growth.

To view the complete BLS report click here