A slow summer for small business hiring

On the hiring front, small businesses seem stuck in the summer doldrums.

The latest employment surveys suggest small employers played only a small role, if any, in the economy’s better-than-expected growth in June. Many remain reluctant to bring on new workers, and signs of improvement are few and far between.

Consequently, employment at small businesses dropped for the second straight month, according to a report by the National Federation of Independent Business, as a greater number of employers reported shrinking than growing. In total, employment fell an average of 0.09 workers per firm, more than twice the rate of decline from May.

In a separate report, the group noted that small business optimism levels started tapering off after consecutive months of improvement.

“We only have to look to Washington for reasons why our economy can’t seem to maintain steam and is on a painfully slow journey towards job creation,” NFIB Chief Economist Bill Dunkelberg said in a statement, later blaming some of the decline on uncertainty surrounding the health care law, which last week suffered a major setback.

But not all of the woe is rooted in Washington. Slow sales appear to be holding back the recovery, too, as the number of business owners reporting sales declines over the past three months surged in June. At the same time, the number expecting higher sales in the next three months dropped.

Even among those who are growing their revenues, many are shy to start adding expenses until the economy kicks it into a higher gear.

“Hiring is still not where we’d expect it to be at this point in the recovery,” Brian Hamilton, chairman of Sageworks, a financial information firm, said in an e-mail. “Despite strong balance sheet and income statement performance, these companies remain very resistant to increasing their overhead by hiring and taking on debt.”

Some are bucking the trend, though. ADP, a payroll processing firm, reported that companies with fewer than 50 employees actually added 84,000 jobs last month, up from 58,000 in May and topping most economists’ forecasts. It was the group’s highest reading for small firms since February.

A closer look at the numbers show it was the smallest of businesses, those with fewer than 20 employees, that contributed the bulk of the jobs (30,000) in June, while the services industry was the most productive sector.

On Friday, the Labor Department reported that the economy as a whole added 195,000 jobs in June, thanks to gains across an array of private industries, while unemployment held steady at 7.6 percent.

Follow On Small Business and J.D. Harrison .

J.D. Harrison covers startups, small business and entrepreneurship, with a focus on public policy, and he manages the Post's On Small Business blog.
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