"Recession? What recession?" Despite all the gloom that has spread around the world in the last year, many people living in the ailing economies have enjoyed very healthy personal economies. Low interest rates may equal misery for those who have to live on their savings but for people earning a steady income, the shrinking cost of servicing a mortgage has meant for a healthy increase in disposable income.

Yet there will be many currently in that second category who will be approaching 2010 in trepidation, for the spectre of rising unemployment hangs over much of the west. It may well have joined with the bad weather to quell enthusiasm for the bumper Christmas shopping spree which was the cherished hope of struggling retailers.

The most recent figures of unemployment for the European Union show an average rate of 9.8% in October, against 7.3% last year. Only the most extreme optimists would be betting against the number continuing to rise, as it has been doing since March 2008 marked the end of three years of steady decline.

Those extreme optimists found some succour last week when the U.K. announced that the number of Britons claiming unemployment benefits fell in November. The country's chancellor, Alistair Darling, was not among them. "It would be a mistake to believe the corner has now been turned," he told parliament's Treasury committee. "We still think that unemployment is going to increase into next year." The apparently promising number really showed only the flaw in the statistic itself, which is different from the measure used by the EU, since the number of people in full-time work had continued falling. The claimant count looked better because some more women had taken part-time jobs.

It will be some while before companies are in the mood to hire more full time staff. First, there will be more job losses to come. Companies that have been trying to weather the economic difficulties by instituting short-time working or unpaid extra holidays are likely to acknowledge that the upturn they were waiting for is not about to come, and that they cannot suspend the job cuts any longer. Governments, forced to cut spending, will have to slash the scale of their workforces and cut the amount they spend, and the staff they support, with outside contractors.

That sounds like a recipe for a 'double dip' recession, and it certainly has the necessary ingredients. Against that background, it is remarkable to note that labor costs continue to rise. In the 27 countries of the EU, hourly labour costs rose 3.1% in the third quarter of the year. Only in Lithuania, Estonia, Latvia and the Netherlands did the figure shrink. In Spain, which at 19.3% has the second highest unemployment rate, beaten only by Latvia, the increase in labour costs was the greatest in Europe at 4.7%. The unemployed youth of that country – an astonishing 42.9% of under 25s – could be forgiven for thinking that market logic is not applying.

The imperative for powering countries out of this dismal scenario must be the creation of new jobs. Yet big business is not going to be the provider. The drive for increased productivity if western businesses are to stand any chance of surviving against the ferocious competition from China and India means that slim-line will be the only sustainable look. So it is new businesses which must fill the gap.

Governments must provide an environment which will nurture entrepreneurs. However much they are forced to cut back in other areas, they cannot afford not to invest in this life force of successful economies. This week President Barack Obama has been badgering America's smaller banks to increase their lending to small businesses. Well he might, since, according to the US Small Business Administration, more than 99% of all employers in the country come into that category.

This autumn he announced a package of support measures, including a national network of 'incubators' to try and aid start-ups with subsidized office space and advice from successful businesses. There are fears, however, that despite his talk of helping business, for all but the smallest, Mr. Obama's health-care plans could be a heavy burden.

In France, President Nicolas Sarkozy has pledged Euros 2 billion for small firms and hopes to encourage them to bump up their exports. Only a tiny minority of French businesses, an estimated 4%, are active in expert markets against 11% in Germany.

In the U.K., Chancellor Darling has deferred for small firms the increase in corporation tax which will come into effect next April. But, hunting for cash, he has scheduled a rise in National Insurance for the following year, a move which is tantamount to a tax on jobs. The man who hopes to succeed him after the election next year, the Conservative's shadow chancellor George Osborne, has said he would scrap National Insurance contributions for the first ten jobs created by new businesses in their first year.

But governments need to go further if they are to get anywhere near the job creation that is required. They should build a bonfire of the regulations that can so stymie the entrepreneurial impulse. Perhaps, if the squeeze on their own spending forces a cut in the armies of bureaucrats and various inspectors most employ, that will be the much to be desired effect.

They might also look to stimulate a new generation of private equity investors, people prepared to put relatively small amounts of cash into helping local businesses. Call them 'community private-equity funds,' they could help even the smallest of artisan enterprises to prosper, bringing custom as well as cash in their direction. Generous tax breaks to foster such an initiative would surely be well rewarded if these businesses were able to hire from the pool of local unemployed.

To wait for big business to fill the void would be futile. Brave entrepreneurs are the only hope.