Summer slump: Small businesses continued shedding workers in July


Small business employment dried up in June and July, putting more strain on the overall economic recovery. (Robert Ray/AP)

On the heels of several discouraging economic reports, the latest small business employment figures further suggest the recovery is losing momentum.

The nation’s smallest firms trimmed their staffs ever so slightly over the past few months, losing an average of 0.04 workers per company, according to a report released Thursday by the National Federation of Independent Business. While that’s not quite as big of a hit as the 0.11 workers they reported losing in June, this marks the second consecutive month in the red after six straight of flat or increased employment.

The NFIB report presents slightly different findings than Intuit’s latest report, which showed that small business employment increased 0.17 percent in June. SurePayroll, on the other hand, reported that the hiring needle didn’t move at all from June to July.

Either way, small businesses are clearly struggling this summer to live up to their traditional billing as the country’s most powerful job engine.

“On balance, July looks like a repeat of June, few jobs and no change in the unemployment rate,” William C. Dunkelberg, NFIB chief economist, said in a statement. “So far, it has turned out to be a cruel summer of dashed hopes for meaningful job creation.”

Making matter worse, less than half of business owners hired or tried to hire new workers during the last three months, and 86 percent of those reported finding few or no qualified candidates for the positions. The results are based on the responses of 1,803 randomly-sampled members of the NFIB.

Only 11 percent said they plan to add to their payrolls in the coming months. Separated by region, Mid-Atlantic and Mountain state businesses plan to cut back on workers, while those in South Atlantic and Central states plan to add employees later this year.

“Job openings are highly correlated with the unemployment rate, so July offers little hope of an improvement,” Dunkleberg said.

On Friday, the Labor Department announced that the unemployment rate edged up to 8.3 percent in July, despite the economy adding a modest 163,000 jobs during the month.

The Commerce Department last week reported that the economy grew at a dismal 1.5 percent in the second quarter, down from 2 percent growth during the first three months of the year — effectively dashing hopes that the recovery would steadily pick up momentum over the course of 2012. The slump was largely attibuted to a dip in business investments, export declines and widespread cuts to government spending.

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 runs the On Small Business blog.
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