Small businesses not keeping with larger companies in hiring

While job growth in the U.S. has been steady over the past year, the gains are slow and erratic at small businesses.

Reports last week show the disparity between overall hiring and that of small companies. The Labor Department said that employers of all sizes added a strong 201,000 jobs in August, compared with the 196,000 averaged over the previous 12 months.

The government doesn't break out its numbers according to company size, but a separate report from payroll provider ADP said hiring at its small business customers fell by more than half last month. ADP counted 21,000 new jobs at its small-business customers, a steep drop from 59,000 in July. The small businesses tracked by ADP have averaged 49,000 new jobs for the first seven months of this year, down from 61,000 a month for all of 2017.

Economist Mark Zandi of Moody's Analytics, which analyzes data provided by ADP's customers, attributes the slower small-business hiring to owners' struggles to find qualified workers for their open positions. In a survey taken during the spring by researchers at Pepperdine University's Graziadio School of Business and Dun & Bradstreet Corp., 18 percent of the more than 1,300 owners questioned said their inability to find workers was keeping them from hiring.

A survey released last week by the National Federation of Independent Business, which questioned its own members, found that nearly 40 percent had job openings they couldn't fill during August. A quarter of the owners said their biggest problem was finding qualified workers.

Some small businesses struggle to find workers because they can't compete with big corporations that offer higher salaries and more lucrative benefit packages. A larger company can also offer a staffer more room for growth than very small companies can.

But many companies are not looking to hire. In a survey taken in July and August by Wells Fargo and Gallup, 35 percent of the 604 owners questioned said they plan to hire in the next 12 months. That's the highest since the survey began in August 2003, well before the Great Recession, but it means that still just about a third of owners plan to hire.

Many of the reasons why owners don't plan to hire grow out of lessons learned from the recession. Before the recession began officially in December 2007, many owners hired staffers in anticipation of getting new business. After being forced to lay workers off, many owners have become wary about the risks of overstaffing. They've said they won't expand their staffs until they have enough new business to justify the added expense.


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