If Small Businesses Are Bummed, Why Are They Hiring?
Wednesday we found out that for the month of September small and medium size businesses added 81,000 and 64,000 jobs, respectably. This level of hiring is weaker than the previous month but still near the high end of jobs growth for the year. Further, these levels are seemingly strong for the SMB sector and one might take it to be a sign that all is looking well for small business owners. Not so fast. The recovery for Main Street is still struggling to truly take flight as uncertainty and weak demand continue to plague business owners. The Nation Federation of Independent Business’s (NFIB) Small Business Confidence Index has been at recession levels since 2008 and did very little year to date. So what is the seemingly strong jobs number missing? Well, the ADP report only measures hiring by establishments, not firms. That nomenclature makes a big difference if an Apple store with fewer than 50 employees added a few more payrolls under this definition it would be counted as a small business hire. Considering that Apple has the world’s largest market cap, a nationwide hiring of Mac “Geniuses” to front run the release of the iPhone 5 doesn’t seem like a good measure of small business employment. I just used Apple as an example but there are many others. Businessweek used Starbucks in their piece. Continuing from here, many of the companies used in ADP’s data are not the best representation of the typical small business. Holly Wade, a policy analyst with the NFIB says “Only one-fifth of small businesses use a payroll service. Those that do are likely more profitable and have more complex employee compensation than the general population. This is why I think their employment data is overly optimistic compared to our data but also compared to BLS data.” Bloomberg continues, “This chart of ADP’s data shows how much of the hiring since 2009 has been driven by smaller establishments. The yellow line is payrolls under 50 employees, the green line is 50-500, and the magenta line is large establishments with more than 500 workers. (They’re plotted on different scales to make them easy to compare.) The white line is the NFIB Optimism Index, which is recovering but still depressed by historic standards. Still, the NFIB’s latest report showed business owners are more upbeat about hiring. A net 10 percent of the 736 NFIB members surveyed reported plans to add workers, the highest level since early 2008…”
Source - Businessweek