U.S. small businesses reported the largest decline in employment since 1974 during the fourth quarter last year, but many of those firms plan to increase hiring this quarter, according to a report of the National Federation of Independent Business.
The fourth quarter drop in employment represents the eighth quarterly drop in the last nine quarters, the federation said. A sampling of 2,322 member firms showed, on the average, an employment decline of 0.76 employes per firm through the fourth quarter.
"Because small business is the source of most long-term employment growth it is clear that major improvement in job opportunities is dependent on recovery in this important sector of our economy," the report said. "From a policy point of view economic recovery must have first priority as a program for providing jobs for the work force."
The group said more than 80 percent of new jobs created between 1969 and 1976 were created by firms having 100 employes or fewer.
In addition, the report also said the biggest problems this year are interest rates and financing. Inflation was the next highest priority although the rate of inflation continued a decline started nearly two years ago.
Small business sales also hit a low note, the report said. The group's index of small business sales dropped to one of the worst levels since the quarterly economic survey was started. It was matched only by the fourth quarter of 1974 and the second quarter of 1980, the report said.
The sales decline was dominated by the wholesale sector, half of whom reported lower sales than in the previous quarter. Profits also were depressed: The index of small business earnings was ahead only of the second quarter of 1980 as the lowest since the group began keeping records, the report said.
However, despite their cloudy past, the small businesses surveyed seemed to see a silver lining ahead. The proportion of firms planning further employment reductions during this quarter dropped dramatically from a record 15 percent in October to 10 percent in January, the report said. The percentage of firms planning to increase hiring rose from 10 percent to 14 percent during the same period. "Historically, these figures have accurately predicted actual changes in employment for the economy as a whole," the report said.
In addition, the index of small business optimism rose during January. "The economy may begin to grow in real terms in the first quarter of 1982," the report concluded.