Small Business Employment Continues To Leak

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The jobs that might have been created in 2010 but were not are largely due to small businesses which could not afford to add the workers they needed to.

According to a new Gallup poll, :Half of small-business owners (51%) who employ people other than themselves hired new workers in 2010, according to the Wells Fargo/Gallup Small Business Index survey. However, of these, 42% hired fewer new employees than they needed — likely a major reason job growth was so anemic last year.”

The problems is not likely to be solved soon. Most federal bank and small business statistics show a persistent reluctance on the part of financial firms to supply small businesses with capital and loans. Many of these financial firm had large losses during the recession and do not want to compound those though the risk of extending credit to companies with few assets and limited numbers of customers. Large companies, in contrast, find the capital markets competing with their needs which has kept their borrowing costs near historically low levels.

Small business hiring will not rise until the government puts into place some incentives for banks to extend them credit or until the financial recover is complete. That complete recovery is years away.

Methodology: Results for the total dataset are based on telephone interviews with 604 small-business owners, conducted Nov. 4-10, 2010. For results based on the total sample of small-business owners, one can say with 95% confidence that the maximum margin of sampling error is ±4 percentage points.

Douglas A. McIntyre