Disturbing trends in small-business hiring


Veterans speak to a job recruiter at a 'Hiring our Heroes' Job Fair on March 27, 2014 in New York City. (Photo by Andrew Burton/Getty Images) (Andrew Burton/Getty Images)

Small businesses suffered a rough winter on the hiring front, which many analysts blamed on a series of particularly brutal snowstorms. However, even with the weather heating up last month, small employers were still slow to add new openings.

Which begs the question — is there something else going on here?

Small businesses added a modest 72,000 jobs in March, down slightly from 76,000 the month before and well off a peak of 113,000 back in November, according to report published by payroll company ADP on Wednesday. Of those, companies that produce tangible goods (as opposed to services firms) added only 9,000 jobs.

Meanwhile, Intuit, a business software company, reported that small-business hiring ticked up a minuscule 0.01 percent in March, following zero job growth in February.

But it gets worse. Small firms’ share of the nation’s net new jobs (191,000 in March) dipped below 40 percent for only the second time in the past year, according to ADP. Since the start of 2013, the only time small businesses have accounted for a smaller portion of job gains was last October, when the government shutdown brought small-business hiring to a screeching halt across the country.

Mark Zandi, chief economist of Moody’s Analytics, says the weak numbers of late, at least for small employers, are likely tied more closely to the sputtering housing rebound than the harsh winter.

“The key to small business job growth is the housing recovery,” Zandi said during a call with members of the media on Wednesday, later noting that many construction, landscaping and home improvement firms tend to be small. “The big guys are not as tied to housing, at least not to the same degree.”

Zandi noted that the housing market has started to bounce back slowly, but volatility in terms of credit availability, underwriting standards and interest rates could further delay the recovery, and by extension, postpone (but not likely “short circuit,” he said) the recovery for businesses for Main Street.

More alarming, Zandi added, is what analysts are seeing from new businesses, which have historically accounted for a relatively large share of the nation’s job growth from month to month.

“A lot of the growth among small businesses usually comes from fast-growing start-ups, and that’s just not happening right now,” he said during the call, noting that employment growth by young companies is holding stable — “but at a very low level.”

“Unless that changes,” he added, “I think that’s going to be a problem moving into the second half of the decade.”

Follow J.D. Harrison and On Small Business on Twitter.

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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