Job growth in the small-business sector (1-49 employees) has been slowing down, according to Mark Zandi, chief economist at Moody’s Analytics. This trend is a blip in mainstream news outlets.
Very small businesses of 1-19 employees gained, on average, 13,000 new hires a month in first-quarter 2019 versus average monthly job losses of 18,333 in the second quarter, according to the Automatic Data Processing National Employment Report. ADP’s nonfarm private sector payroll data surveys 411,000 American clients and about 24 million employees, published in alliance with Moody’s Analytics. The ADP/Moody’s monthly employment report publishes a day or two prior to Uncle Sam’s monthly jobs report at the beginning of the month.
Frank Knapp Jr. heads the South Carolina Small Business Chamber of Commerce. “Should we be concerned that very small businesses are losing jobs and not being created?” he said in a statement. “Absolutely! These very small businesses make up about 67% of all our nation’s businesses.”
The Palmetto State voted for President Trump. Under him, the trade war between China and the US is one factor hammering very small businesses, according to Zandi. He cites others such as employers’ struggle to find qualified workers.
A part of this dynamic is the low jobless rate. That can put workers at an advantage in bargaining salaries and wages with employers. When the supply of job seekers declines, employers have less potential workers to hire. The opposite, when there is a surplus of job-applicants, tends to push down workers’ income.
Further, the expanding trade war is hiking prices through increased tariffs, or taxes, on US consumers and businesses. The upward spike of prices should become more apparent in the last quarter of 2019. It is hard to see how this development would improve job growth at very small businesses that typically operate on razor-thin margins.
The composition of very small businesses is varied. There are dentists who employ a couple or few hygienists and an office manager. Independent contractors can be artists and writers.
The decline in job growth that very small firms are experiencing is shadowing an economic slowdown underway. GDP growth dropped to 2.1% in the second quarter of 2019 from 3.1% in the first quarter, according to the Bureau of Economic Affairs.
US gross domestic product grew, on average, by 4% a year from 1992-99 compared with a 3.85% growth rate in 1983-90, according to the Bureau of Economic Affairs. There was a recession, or economic contraction, in 1990-91.
Many in the business press are writing about a Trump recession. However, it is unclear if the fall in job growth at very small firms that correlates with declining economic growth is a harbinger of the next recession.
On one hand, recessions follow expansions as night follows day. On the other hand, economists across the political divide have wrongly predicted economic downturns with regularity.
One thing is clear. The fall in job growth at very small firms is occurring during an expansion. You do not need an economics degree to see what a recession could do at the nation’s very small firms.
Seth Sandronsky lives and works in Sacramento. He is a journalist and member of the Pacific Media Workers Guild. Email sethsandronsky@gmail.com.
From The Progressive Populist, October 1, 2019
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