Despite being in a recession throughout 2008, the United States still saw an increase in small business start ups. New data from the Kauffman Foundation's Index for Entrepreneurial Activity proves once again that even a down economy can't keep Americans from starting new business ventures. The Index also found that new business creation was up across ethnic groups (except for African Americans), geographic regions (except for the Midwest) and both genders. However, this growth comes from the creation of low-income-potential and middle-income-potential businesses. The rate of creation for high-income-potential businesses saw an annual decrease from 2007.

On average, 320 out of every 100,000 Americans created a new business each month. As a whole this mean that 530,000 new businesses were created each month during 2008. These numbers were an increase over 2007 when 300 out of every 100,000 Americans started a new enterprise.

"The overall pace of entrepreneurial activity did not suffer during the recession in 2008, which is great news. This is consistent with historical patterns, to the extent we understand them, which indicate that entrepreneurial activity is largely insensitive to the economic cycle," said Robert Litan, vice president, Research and Policy at the Kauffman Foundation. "So far, at least through 2008, this pattern is holding up."

Along ethnic lines, Latinos and Asians experienced large increases in entrepreneurial activity rates in 2008. Latinos' entrepreneurial activity rate increased from 0.40 percent in 2007 to 0.48 percent in 2008, continuing an upward trend that began in 2005. Asian-Americans' entrepreneurial activity also increased sharply, from 0.29 percent in 2007 to 0.35 percent in 2008.

The rate of entrepreneurial activity among immigrants, already high relative to the native born, continued a strong upward trend. From 2007 to 2008, the entrepreneurial activity rate among immigrants increased from 0.46 percent to 0.53 percent, which is considerably higher than the 0.28 percent rate of entrepreneurial activity among the native born.

Non-Latino whites followed the slight upward for the country as a whole while African Americans saw a slight decline in business creation rates.

Another interesting finding is that rates declined from 0.33 percent in 2007 to 0.31 percent in 2008 for the college educated, but increased for the least educated. Entrepreneurial activity rates increased from 2007 for both men and women (from 0.41 percent to 0.42 percent for men and from 0.20 percent to 0.24 percent for women).

Entrepreneurial activity rates reflect strong regional patterns. New-business-creation rates are highest in the West and South. From 2007 to 2008, the largest increase in entrepreneurial activity occurred in the West (0.37 percent to 0.42 percent). Entrepreneurial activity rates also increased in the Northeast (0.26 percent to 0.29 percent) and South (0.31 percent to 0.33 percent), whereas entrepreneurial activity rates declined in the Midwest (0.25 percent to 0.23 percent).

Entrepreneurial activity rates varied substantially across states, from a low of 0.14 percent in Pennsylvania to a high of 0.59 percent in Georgia. Entrepreneurial activity rates also were high in New Mexico (0.58 percent), Montana (0.53 percent), Arizona (0.49 percent), Alaska (0.44 percent), and California (0.44 percent). In addition to Pennsylvania, the lowest rates of entrepreneurial activity were found in Missouri (0.15 percent), Wisconsin (0.17 percent), West Virginia (0.17 percent), Iowa (0.19 percent), and Ohio (0.19 percent).

One of disappointing findings of the Index is that all of this growth is coming from the creating of low and middle-income-potential businesses. Coupled with the percentage decrease in the creation of high-income-potential businesses, the data suggests that Americans are creating business out of necessity instead of opportunity.