Small Business Hiring: Hard Hit by Recession, they See Light at the End of the Tunnel

Small businesses were hit very hard by the recession. As consumers faced unemployment, they stop spending. Also, corporations became so uncertain about the future that they hoarded cash rather than invest it. Finally, state, local and federal government agencies faced enormous deficits and cut back on their procurement activities as a result. These three things taken together meant that the demand for small business products and services declined drastically.

The Gazelle Index national survey of small businesses indicated that small businesses made significant cuts to their workforce in order to survive. Examining the cuts by industry, the largest percentage of businesses cutting jobs was in manufacturing, where 68.5% of all small businesses reduced their workforce. Of that number, 27.8%  cut jobs by more than one half. The construction industry was second in regards to cuts in employment. Specifically, 54.5% of all small construction companies cut their workforce and 30% indicated they cut it by more than one-half. After the manufacturing and construction industries, the next largest percent of small businesses making cuts in jobs cuts were in professional and technical services, transportation and warehousing, and wholesale trades. As the table below shows, the recession hit small businesses hard, and they cut their workforce significantly in order to survive.

However, the recent Labor Department’s January 2012 jobs report indicates that things may be finally turning around. The report showed that the unemployment rate went down from 8.7% to 8.5% and more importantly, the economy created 200,000 new jobs. The most important thing to notice is where the jobs were added during December.  The largest numbers of new jobs were added in transportation and warehousing (50,200), health and educational services (28,700), retail trades (27,900), manufacturing (23,000), and construction (17,000).  These are some of the industries that sustained the largest cuts in employment, particularly among small businesses

It may surprise you to learn that 75% of the 6.5 million jobs which have not been regained since the recession are in just three industries: Manufacturing (30%), Construction (30%), and Retail trade (14%). This means that if the economy grows in those industries, the employment picture should improve significantly. Believe it or not, that is precisely what is happening according to the latest Labor Department employment report. Therefore, things are indeed looking up.

Large corporations increase their fixed investment by 15.7% during the last quarter, and consumers are spending more of their disposable income. This means that the products and services of small businesses will be in greater demand, and as a result small business hiring will increase. So, while things are far from normal, small business outlook and the employment beginning to turn around.





Source: 4th Qt Gazelle Index National Survey





Be the first to comment

Leave a Reply

Your email address will not be published.