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BFS Capital Blog

Data Shows a Drop in Small Business Hiring

October 21, 2014

The ADP National Employment Report is a monthly measure of the change in total U.S. nonfarm private employment taken from real, anonymous payroll data of client companies served by ADP. ADP’s August National Employment Report showed private payrolls adding 204,000 jobs in the last full month of summer. This is the fifth consecutive month of ADP measured job increases of over 200,000.

“Steady as she goes in the job market. Businesses continue to hire at a solid pace. Job gains are broad based across industries and company sizes. At the current pace of job growth the economy will return to full employment by the end of 2016,” said Mark Zandi, chief economist of Moody’s Analytics.

Professional and business services added the most jobs at 51,000, trade/transportation/utilities added 28,000 jobs and manufacturing added 23,000. Construction and financial activities industries fell behind, adding only 15,000 and 5,000 jobs respectively.

While payrolls for large businesses – classified as having 500 or more employees – increased by 52,000, a great jump up from 32,000 in the month prior, employment among medium business and small businesses has dropped. Medium businesses – classified as having 50-499 employees – added 75,000 jobs, compared to 88,000 in July, and small businesses – businesses with 49 or fewer employees – increased payrolls by 79,000 jobs. That is a decrease of 11,000 jobs from the month prior.

Paychex IHS Small Business Jobs Index announced a business index of 100.99 for August, down 0.11 percent from July. This is the third index decline in the past four months.

“Although the Paychex IHS Small Business Jobs Index continues to show positive year-over-year growth, the short-term trend has declined 0.16 percent in the past three months. As most other employment indicators accelerated over the summer, it appears that small businesses may have been on the front end of that trend, in the spring, with the index reaching its peak level in April 2014,” said James Diffley, HIS Chief Regional Economist.

On the other hand, the Bureau of Labor Statistics released a much weaker than expected report for the employment situation as of August 2014, reporting an increase of only 142,000 jobs.

“The number was a surprise and a disappointment but we do not believe that it indicates a slowdown in the US economy,” wrote Joseph Lake, U.S. analyst for The Economist Intelligence Unit, in a note on the report.

The average hourly earnings gained 6 cents in August, bringing it up to $24.53, and the workweek was reported to be 34.5 hours for the sixth month in a row.

While small businesses may continue hiring more employees, the rate of their hiring is certainly slowing down.

Why is Hiring Slowing Down?

This drop in small business hiring could very well be the cause of a summer’s end. Teachers are returning to work, students are returning to college and retailers may be preparing for the next season.

Hiring amongst small businesses could also be dropping due to the increase of healthcare costs and a lack of business funding.

Healthcare in the U.S. has been pushed onto employers. A large majority of small businesses are marginal and cannot afford to bring on new employees and provide healthcare options when the costs continue to rise.

Healthcare insurance for an employee with a family can exceed $1,000 per month. If a worker is over the age of 50, costs can even be much higher. When you add workers’ compensation insurance, disability insurance and unemployment insurance, Social Security and Medicare shares, and any additional overhead costs, it takes a huge hit on a small business’s budget.

Increase Capital to Increase Hiring

If the incoming revenue isn’t enough to keep your business standing, you might want to look into some other funding options.

A quick and easy option to look are business cash advances. If you know that you’ve just hit a small bump in the road, this is a flexible funding solution that could provide just enough cushion to get your business headed back in the right direction.

Another option to consider are small business loans. These short-term loans are ideal for those businesses that rely more on invoices rather than credit card transactions to get paid. As with any type of funding, it’s important to do your research before entering into any type of agreement.
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