Posted on Tuesday, January 11, 2011
Hiring grew at a modest pace at America's smallest companies in December, as firms with fewer than 20 employees added 57,000 new jobs to the economy, according to an Intuit report released Tuesday. The increase amounts to a 3.4 percent annual pace.
Preparing for Friday's official employment report, there are several ways to look at Intuit's most recent data.
You could look at the glass half full: last month's jump brings the total number of small business jobs in the economy roughly half-way back to pre-recession levels, building on 15 consecutive months of growth, according to Intuit.
You could also look at the glass half empty: national employment has hardly budged since the depths of the Recession. The nation's jobless rate remains at a staggering 9.8 percent, and big firms are still unwilling to make new hires. In fact, almost all of last month's private sector job growth came from companies with fewer than 500 workers, yesterday's ADP report shows.
Or, since the small business employment picture usually offers a glimpse into the future, you could look ahead: the recent spike in small business jobs is a good sign that an overall economic recovery is underway.
"When there's a recovery, small businesses recover first because they're more nimble at dealing with a slack labor market than big firms," says Sand Hill Econometrics founder Susan Woodward, a former chief economist at the Securities and Exchange Commission. (Woodward helped construct Intuit's index.)
Why? Because "big corporations, unlike small firms, have Human Resource departments that tend to make adding jobs a five-week long ordeal: three weeks before they're authorized to hire a new worker and then another two weeks of arguing about how much they can pay such a person," Woodward says.
Across the U.S., the Western and South-Central regions of the country added the most small business jobs, according to Intuit's report, with the highest increases month over month taking place in Maryland, Washington and Texas.
Intuit's report also found that while the number of hours worked by small business employees rose in December, compensation remained flat. This a sign that the labor market is still very slack, Woodward points out. "For employers, there are plenty of workers out there to hire -- and they don't have to pay up to get them."
Nathaniel Cahners Hindman, THE HUFFINGTON POST