MYTH NO. 5. Entrepreneurs are the foundation of the economy. ENTREPRENEURSHIP IS STILL ONE OF

UNITED STATES | THE ECONOMY

tremendous mismatch in the jobs market right now, " says McKinsey partner James Manyika, co-author of a new study titled An Economy That Works: Job Creation and America's Future. " It runs across skill set, gender, class and geography. " A labor market bifurcated by gender, skill set and geography means that unemployed auto-workers in Michigan can't sell their underwater homes and retool as machinists in North Dakota, where homes are cheaper and the unemployment rate is under 5%.

MYTH NO. 5

Entrepreneurs are the foundation of the economy

ENTREPRENEURSHIP IS STILL ONE OF

America's great strengths, right? Wrong. Rates of new-business creation have been contracting since the 1980s. Funny enough, that's just when the financial sector began to get a lot bigger. The two trends are not disconnected. A study by the Kauff-man Foundation found an inverse correlation between the two. The explanation could be tied to the fact that the financial sector has sucked up so much talent that might have otherwise done something useful in Silicon Valley or in other entrepreneurial hubs. The credit crunch has exacerbated the problem. Lending is still constrained, and the old methods of self-funding a business—maxing out credit cards or taking a home-equity loan—are no longer as viable.

So where does it all leave us? With an economy that still needs a major shake-up. There are short-term and long-term solutions, fob No. 1 is to fix the housing market. While the government is understandably reluctant to get deeper into the loan business, it's clear that private markets aren't able to work through the pile of foreclosures quickly enough for house prices to stabilize. If the numbers don't improve in the next month or so, it might be time for the government to step in and either take on more failing loans (a TARP for homeowners as opposed to investment banks? ) or pass rules that would allow more homeowners to negotiate better terms with lenders.

And let's not forget the youth-unemployment crisis. There's now a generation of young workers who are in danger of being permanently sidetracked in the labor markets and disconnected from so-aejy. Research shows that the long-term

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