Small Businesses Dominate Job Losses

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Job losses at companies with fewer than 50 workers eclipsed larger companies when it comes to job cuts according to new data from the Labor Department. The information covers the last quarter of 2009.

The BUSINESS EMPLOYMENT DYNAMICS data base reports that “Firms of all sizes experienced continued net job losses in the fourth quarter of 2009. Firms with 1 to 49 employees accounted for 61.8 percent of all net losses.”The same small businesses accounted for 54.1% of all hiring during the period. These firms employ about 29% of all workers in the US.

All businesses in the US cut a net 200,000 jobs in the fourth quarter by adding 6.6 million jobs and laying off 6.8 million workers. Details of the report show that businesses with 50 to 249 workers made 17.8% of all job cuts in the fourth quarter and 17% of job gains. Firms with 250 to 999 employees added 9.9% of new jobs and had 10% of job losses. Corporations with 1,000 or more workers added more people than they fired. Companies in this sector employ about 37.8% of all workers which accounted for 18.3% of all job gains compared to 17.7% of job cuts

Is it any wonder? The lay-off numbers reported by the media are the large ones in which thousand of people lose jobs. When a tiny company cuts four or five people, no one knows about it other than their employers, their families and their friends.

Large companies have also been busy raising hundreds of billions of dollars in low interest debt, swelling their assets. Many small businesses cannot get access to capital at any price.

The data points to the weakness in the federal government’s efforts to improve unemployment. There are no major programs aimed at improving hiring at small companies. Billions of dollars are spent on unemployment insurance. Tiny firms cannot turn to Washington for any meaningful infusion of capital. Banks are not encouraged by the federal government to do more lending to companies with under under 50 people. There is no risk mitigation program for banks which would encourage them to be helpful.

And there is no program to give small businesses large tax credits to add workers. In other words, the plight is almost certain to get worse which means  a major source of high unemployment will remain unaddressed.

Douglas A. McIntyre