The slowdown was spread evenly between the smallest of companies (defined by ADP as those with less than 20 employees) and their slightly larger counterparts (between 20 and 50 employees). Both subsets of the small business sector posted their lowest totals (38,000 and 40,000, respectively) since the summer.
It’s a somewhat surprising result, considering the mood on Main Street at the end of 2014. Sixty-two percent of small business owners, for example, said they felt optimistic about the direction of their local economies heading into the new year, according to a survey last month by Capital One. Similar polling by the National Federation of Independent Business in December revealed the highest level of optimism among small business owners since October 2006, driven largely by a surge in hiring expectations.
So, what happened last month?
“I don’t think there’s anything fundamental going on in the small business sector,” Mark Zandi, chief economist for Moody’s Analytics, said during a press call Wednesday when asked about last month’s dip, later chalking it up to “the normal ebb and flow” of the labor market. He pointed to the NFIB report, as well as another from Experian showing improved credit and falling loan delinquency rates for small businesses, as evidence that small businesses are still bouncing back from the economic downturn.
Still, there’s some reason for concern moving forward.
“We do need to watch this, though, because there are a fair number of small businesses in the energy and energy supply sectors” Zandi said. “So, we may see some effects on small businesses from the fallout in oil prices. I don’t think we’re seeing that yet, but it’s something to watch for in the months ahead.”