Small business hiring accelerated in May. Here’s why that’s hardly worth celebrating.


FILE - Job seeker Alan Shull attends a job fair in Portland, Oregon. (Rick Bowmer/AP)

Hiring by small businesses accelerated to the fastest pace of the year in May.

If only that was something to celebrate.

Small employers added a modest 82,000 positions in May, up from 76,000 the month before and the highest mark since December, according to the latest figures from payroll processing firm ADP. Still, even that remains behind the average monthly rate recorded last year (88,000), which was considered a ho-hum year on the hiring front.

“The job market has yet to break out from the pace of growth that has prevailed over the last three years,” Mark Zandi, chief executive at Moody’s Analytics, said in a statement concerning the report.

In large part, that’s due to the persistently slow growth of goods-producing businesses, with small companies in that category generating a meager 9,000 jobs for the second straight month in May. Their monthly contribution to the small-business jobs numbers has fluctuated between 5,000 and 15,000 for the past nine months.

During the same period, by contrast, service-oriented small businesses have created between 46,000 and 98,000 jobs per month, adding another 73,000 last month.

One bright spot in the report was that small businesses, often lauded as the nation’s most reliable job creator, contributed more than 40 percent of the overall job gains for the first time in the past three months. However, that’s simply the result of a drop in job gains by all employers (down from 215,000 in April to 179,000 in May).

A similar report by Intuit, a business software provider, showed slightly more robust hiring on Main Street. Its small-business hiring index ticked up 0.17 percent, the largest increase in more than a year — but still only a modest reading based on historical norms.

Why the variation in the reports? In part, it likely results from a different definition of small business. Intuit’s index sifts through payroll data from companies with fewer than 20 employees, while ADP refers to small businesses as any firm with fewer than 50 workers.

However, ADP does split small employers into two subsets, and indeed, those with fewer than 20 workers contributed more of the gains last month, adding 48,000 positions compared to 34,000 added by companies with between 20 and 49 workers.

In other words, it appears, based on both readings, the smallest of small businesses are adding more jobs lately than their slightly larger counterparts.

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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