NEW YORK – Hiring at the smallest U.S. businesses is moderating, a sign of sluggishness in the economy.
Growth has slowed in some indexes measuring employment at companies with fewer than 20 workers. This deceleration indicates a disconnect in the labor market; payrolls for all nonfarm employers rose at the fastest pace since 2001 in the 12 months through February, based on Labor Department data. However, March’s unemployment report came in far below expectations with only 126,000 jobs created in the month.
Monitoring the smallest companies is important because they accounted for about 23 percent of all nonfarm private jobs created last year, said Ahu Yildirmaz, head of the ADP Research Institute in Roseland, New Jersey.
Basic drivers of demand remain intact: Consumer spending grew last year by the most since 2006, and business owners now have greater access to credit. So the year-to-date sluggishness could reflect severe winter storms and cold, a decline in consumer confidence since Jan. 25 and a potential talent gap of qualified applicants, she said.
Companies with fewer than 20 workers employ about 21 million Americans, or approximately 18 percent of the workforce, according to Susan Woodward, president and founder of Sand Hill Econometrics in Menlo Park, California.
One reason for the smallest-company stall is “the big decrease in the degree to which people try to start a business,” Woodward said. Regulatory and tax requirements discourage some would-be entrepreneurs, while there’s also “softness” in the number of their full-time employees and hours worked, she said.
