Small businesses keep fueling the economy, post largest jobs gains in nearly two years


Construction and manufacturing companies helped generate the nation’s highest job gains in a year in December. (Gregory Bull/AP)

Many economists warned that the government shutdown would have an immediate and lasting impact on small business hiring across the country.

Immediate, yes. But lasting? Apparently not.

Small business owners rebounded from a dismal showing in October to close out the year with their two highest hiring totals of 2013, according to the latest jobs report from payroll processing firm ADP. In December, employers with fewer than 50 workers added 108,000 jobs, up from 102,000 in November and well above the 37,000 positions they added the month before, during which the federal government closed for more than two weeks.

It was the largest gain for small firms since early 2012 and the second consecutive month that they have outpaced their larger counterparts, though they weren’t alone in posting impressive numbers in December. Overall, the economy added 238,000 jobs, the largest gain in a year, according to ADP.

Those gains have helped drive the national unemployment rate down to a five-year low of 7 percent. The Labor Department will update that figure when it releases its monthly employment report on Friday.

“It appears that businesses are growing more confident and increasing their hiring” Mark Zandi, chief economist at Moody’s Analytics, said in a statement accompanying with the report, noting that the job gains were spread across a number of industries, particularly manufacturing and construction.

Continuing a longstanding trend, service producing businesses led the way with 170,000 jobs (79,000 at small firms), though that was down slightly from an upwardly revised 182,000 in November. Companies that produce goods again lagged, generating 69,000 jobs (28,000 at small firms).

ADP’s report is the latest in a series of signs pointing to a healthier economy, with the Census Bureau reporting this week that the country’s trade deficit has fallen to a four-year low. Meanwhile, the Federal Reserve has indicated that it plans to start pulling back on its stimulus efforts, evidence bankers believe the recovery may be able to sustain momentum on its own.

On Main Street, the gains may also be aided by an improving credit market, as more entrepreneurs appear to be finding the capital they need to start or expand their businesses. In the past few weeks, surveys have shown that both the volume of small commercial loans and the application approval rate for small employers are rising.

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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