Small Business Sputters

Small business is supposed to be the most important engine of the jobs market. Many economists believe that companies with fewer than 20 workers account for more than half of all U.S. jobs. The small business sector has been troubled by a lack of credit since the recession began. Small companies often cannot get loans from banks that are worried about their own balance sheet risks.

New information about small business employment activity shows that it is unlikely to help lift the jobs market from the current high national unemployment level, which could stay above 8% until the end of this year or beyond. Intuit’s carefully followed Small Business Employment Index indicated that small business employment grew only 0.2% in February, or about 45,000 new jobs. These figures are not comparable to federal data because the samples and research methods are different. Federal data shows overall job additions are about 170,000 a month. But, if the Intuit data is directionally correct, the small business sector jobs market has lagged.

The other part of the Intuit data that is troubling is that:

average monthly hours worked decreased slightly by 0.04 percent, or six minutes, and average monthly compensation increased by 0.15 percent, or $4 per worker.

Companies finally have begun to increase wages, albeit slightly, but they continue to try to wring productivity out of their workforces, which often include part-time workers. Many of these people are without benefits and are probably the first cut when revenue results falter.

The fortunes of small business were not particularly good during the recession, and they do not seem to have improved much since then.

Douglas A. McIntyre