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MinnEcon Blog
Paul Tosto

Self-employed taking a hit in the recession

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There's a romantic image out there of the guy who loses his job in the recession but then uses the tough times to become his own boss and build his own business.

It's a great image. But the data often mess up the romance.

We learned that lesson again after looking at newly released numbers from the state Department of Employment and Economic Development showing Minnesota lost some 10,000 self-employed businesses in 2008 -- the first year of the Great Recession.

It works out to about a three percent drop following five years of solid growth in what was a hot economy.

Here's a look at the key chart (click on the chart for a larger view).

This is a big deal for a few reasons.

The self-employed make up about 70 percent of the businesses in Minnesota, responsible for about 12 percent of the state's total jobs, DEED reports.

In 10 Minnesota counties, the self-employed were responsible for more than 20 percent of the jobs.

And even with the drop in 2008, the growth in self-employed business has been important to the economic health of small Minnesota counties like Big Stone, where Brent Olson, one of our MinnEcon Economic Lookouts, raised concerns about whether one-man businesses are being shut out of grants and other aid because they're, technically, not creating jobs.

Self-employed short changed in this economy? The view from Big Stone County

If there's good news, it's that the Minneapolis Fed data from last year showed that new businesses in Minnesota were formed at a pretty steady rate regardless of the economy's health.

(Source: Minneapolis Fed)

New business failure rates are also pretty consistent in good times and bad. So maybe when we see the 2009 and 2010 data for self-employed, we'll see things even out a bit.

We hope.

Check out the DEED report and tell us what you're seeing. Post below or contact us directly at MinnEcon.

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