My contracting income is "up and down" and my baby is due in a couple of weeks. Is this a bad time to start a business? Is there ever a "good time"?

Yes, every once in a while the planets align. Some questions to consider:

Is there a significant other contributing cash flow to the home budget?

Is there a nest egg? 401K or other instrument that can be cashed in if [and only if] all else fails?

Define startup? Is it bricks & mortar? High overhead environment? Require major up front investment?

I won't get out of bed in the morning without a Lean Canvas to guide my efforts. Have you complete this simple 9 step process? http://leancanvas.com

There are few challenges in life more rewarding than starting a new business from the ground up. But it takes an inner peace! {grin} And focus. Laser-like focus.

Put yourself in a position to win, even if a number of events go south. If you proceed, then commit 100%.

There is no perfect time to start a business. If you are passionate about what you do you'll have the tenacity to keep going. Make sure to balance work and life and focus on the task at hand. You'll need to recover and your baby will consume a lot of your time for a while. Don't feel frutrated if things don't go as planned. Just know that they won't! You will probably need to just fit the business in and be flexible. You don't say whether your income is a need or an extra. That will definitely be a factor in how much time you have to build to a steadier income.

Yes,

I started my previous company just before my first child was born. It was just too much as I needed and wanted to be there for my baby girl.

Steve