Analysts Speculate Hiring May Be Sign Of Growing Economy
In a time of uneven market conditions, small businesses are being credited with leading the charge in hiring, a bright spot in current economic indicators. The Wall Street Journal reports that according to Labor Department data, more than half of new American jobs are coming from the small business sector, as small businesses typically have room to respond more quickly to market conditions. For instance, prior to the 2008 recession, the smallest US companies began losing workers two quarters prior to official government records’ indications of the start of the recession, according to Bureau of Labor Statistics economist Jessica Helfand. In the current market, economists are once again closely eyeing small business hiring as a metric to project economic conditions. Although the likelihood of a recession is still considered fairly low, industrial production declines and a contraction in manufacturing activity in part are leading some to project the odds of one are higher now than any time in the last three years. Still, data from the Bureau of Labor Statistics, the NFIB, and Automatic Data Processing all show that small businesses are still continuing to hire. According to NFIB Chief Economist William Dukelberg, “Small businesses are at the front line. They’re the first ones to notice people aren’t spending as much.” This runs counter to a traditional assumption expressed by CRT Capital rate strategist Ian Lyngen who said, “The assumption is that larger firms are a good enough indicator” and results they show will then trickle down to smaller firms.
What This Means For Small Businesses
According to the latest NFIB Small Business Jobs Report surveying 1,438 US small businesses, in January small businesses saw an uptick in hiring, with average employment per company rising by 0.11 workers from a loss of -0.07 workers in December. The survey found that 29 percent of small business owners had jobs they were unable to fill in January. This marks an increase of one percent over December and the highest level since the recession. Further, “a seasonally adjusted net 27 percent of owners reported raising workers’ compensation, up 5 points and the highest level since late 2007.” This data provides a counter to concerns that the economy is cooling, as small businesses once again show their importance as key drivers of US economic growth.
The Washington Post also reported on the NFIB’s latest Small Business Jobs Report.
Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.