There are a lot of ways this recession is different from others in recent history. One of the big differences: In the past, small-business hiring led the way out. Not this time, and there are three main reasons for it.
A late-October survey revealed the sad story: Despite the influx of stimulus money, small businesses aren’t benefiting — if you use employment as a yardstick.
The survey, conducted by the National Federation of Independent Business, shows that 19% of small businesses cut an average of 4.2 jobs in the third quarter of ’09. Only 8% boosted employment by an average of as much as 3.5 workers. IN contrast, coming out of the last recession, companies with fewer than 20 employees generated 40% of job growth, according to the Small Business Administration.
Why isn’t small business the big employment engine these days? Three reasons, according to most reports:
- Tight credit. The recent NFIB survey reported that 14% of small-biz owners say loans are hard to get.
- Limited exports. Big outfits usually have access to growing overseas markets, while small businesses rely on the local economy.
- Healthcare costs. The more uncertainty small firms face in this area, the more reluctant they are to expand and hire.
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Tags: employment, NFIB, Recession, stimulus
November 12th, 2009 at 4:23 pm
One issue of foreign sales is that these markets make it very difficult for smaller companies with a needed product to penetrate the market. The U.S. Government refuses to help small business. Our Congressman are so tied up with Healthcare and Cap and Trade, they refuse to even talk with citizens. If the government would threaten the same trade barriers we experience. this would stop.
It appears to small business that the U.S. Government has taken a negative stand to business and the only legislation on the horizon will create negative influences. In our market, the uncertainty is causing potential clients to delay decisions until they see where the market is heading and the government is not sending signals that they are pro-business.
Failure to support small business is causing layoffs and will delay hiring until there is some evidence of a turn around. Tax incentives for hiring new employees or enhanced tax write-offs for new equipment purchases or expansions should be a topic in Congress right now. How many years do we need to have the same election slogans (It’s the Economy Stupid!) but see no action that reflects that realization. Nothing demoralizes the country like job losses.
November 12th, 2009 at 4:49 pm
Our government is overhauling a healthcare system that is aready the most expensive in the world by making it even more expensive. And the bill is sent to business operators. I do not know of any other country that makes businesses pay for the healthcare of its citizens. It puts American business at a significant disadvantage when competing on the world market. Fortunately, our government found a way to mitigate this problem. They are spending our money at unprecedented rates, tripling the national deficit while corrupting the value of our greenback. With the dollar losing value against all other major currencies, our competitive position for products and services improves on the world market. Of course, our economy and our standard of living are quickly deteriorating. This should reduce labor costs, again helping the competitive position of our businesses. So who says our government isn’t helping business?
November 12th, 2009 at 4:58 pm
The biggest reasons businesses have a tough time weren’t even mentioned: governmental regulations and taxes. All of the reasons listed above are a result of governmental meddling.
November 12th, 2009 at 5:17 pm
I agree, most small businesses did not receive the stimulus funds earmarked to help the economy. I provided professional services to government agencies and found that the Agencies “keep the funds” for existing employees and to hire retired or layed off union employees to do the work. The unions are a powerful group and the pressure they place on government officials to protect the labor force is tough to beat.
November 12th, 2009 at 5:44 pm
Small businesses also depend on two other critical factors for their growth; Consumer confidence and big business investment. Many small business earn their income from consumer spending. Without increased consumer confidence they are unlikely to see revenue growth. In addition, small businesses are often suppliers to larger organizations. Without big company investments in outsourced goods and services they are unable to stabilize and grow themselves.
November 12th, 2009 at 7:09 pm
This administration is clueless about helping small business, and refuses to acknowledge its crucial role in employment. Tax credits don’t help when you’re loosing money! Stimulus funds never go down the food chain. Think how few billions of guarantees would have impacted the recession if banks had been mandated to give guaranteed loans under realistic loan standards to under 50 employee businesses. TARP is irrelevant to my business and the people I have let go. A friend is trying to gain approval as a HUB Zone business. SBA processing is mandated in 30 days; its been 6 months, the application hasn’t been touched, and she’s strangling! The administration is in chaos, drunk with “power”, and spending like a sailor! What we need is “Change in 2010″.
November 12th, 2009 at 7:27 pm
Well it looks like everyone on this site has all the answers so lets see what happens in the next 12 months
November 12th, 2009 at 7:53 pm
as for favoritism even Jesus Christ used favoritism >just read the parable of the talents.
November 19th, 2009 at 3:02 pm
It’s not credit that’s holding small business up, it’s the attack on profits through higher taxes and more regulation. Get the government and their greedy tax fingers out of our hair and we’ll grow like a weed.
November 19th, 2009 at 5:48 pm
LB, I agree with you a 100%. this new administration just refuses to help small business like us, but they welling to help with big companies like GM and others big companies.
December 3rd, 2009 at 8:28 pm
Everyone here is in agreement but we are speaking into an abyss. Any ideas how we can get these important observations to the President and Congress?
April 9th, 2010 at 10:42 am
In my 30 years of practice as a CPA I have never, ever seen credit so tight. The banks continue to act as though they are interested in credit. They put prospects through an “investigation” of their financial history and then place unreasonable covenants and loan requirements that restrict the flexibility of small business. The key to small business is it’s ability to adapt quicker to the marketplace. It is why successful big businesses are so enthralled with outsourcing. Through an effective outsourcing relationship with a viable small business, good business gets conducted more efficiently and more effectively. The challenge for the Small Business Owner (SBO) is having the resources to manage the cash flow for this. And since the banks are all but interested in really lending, the historic Small Business solution is interrupted.