Entrepreneurial

Small Talk: Jobs data contradictory

November 10, 2009

Over the last week there have been some wins and losses for small businesses in terms of new job data.

On the win side of the ledger, a new Intuit survey shows 44 percent of small businesses say they plan to hire in the next 12 months. The data is included in a San Francisco Chronicle story profiling a local Web startup – Airbnb.com – that is doing its part, having hired seven people since April, at a time when national unemployment has reached a 26-year high of 10.2 percent.

But that optimism is tempered by a USA Today story that said the main reason the unemployment rate jumped in October was due primarily to small businesses cutting staff. It seems that while some small companies are starting to hire again, they are still outnumbered by the ones laying off their workers. The story quotes Moody’s economist Mark Zandi, who explained there is a bias towards big companies in how the Labor Department compiles its payroll survey, which showed October job losses were down nearly 50 percent (190,000) from the average of 357,000 in May, June and July.

BANKRUPTCIES HURTING OBAMA EFFORTS

Small businesses are trimming staff, because many of them can’t get the loans they need to stay afloat until the economy picks up again. The Obama administration is ramping up efforts to get more money into the hands of small business owners, but the President’s efforts have been hamstrung by the bankruptcies of two of the country’s biggest small-businesses lenders: CIT and Advanta.

CIT lends to more than a million U.S. small businesses, while Advanta – a small business credit card lender – is trying to collect close to $3 billion in outstanding loans to 360,000 clients. The idea of both CIT and Advanta calling in markers has sent small businesses into a panic. The filings, which came just a week apart, may well be why Obama has chosen next week to stage a small business forum in Washington, in which U.S. Treasury Secretary Tim Geithner and Small Business Administration head Karen Mills will engage small business owners on the best way to get them more financing.

Sensing an opportunity, JPMorgan Chase & Co. announced yesterday it is stepping up lending to small businesses by $4 billion. A Reuters’ story suggested JPMorgan, which received $25 billion in public TARP money, could also be responding to government pressure to do its part to help get the small business economy back on its feet.

AGE BEFORE SIZE

Further along the topic of job creation, the Atlanta Journal-Constitution has a story about a new Kauffman Foundation study that shows how a company’s age, and not its size, is the key factor in how many jobs it creates. The Kauffman study, which used 2007 U.S. Census Bureau data, shows that companies less than five years old created nearly 66 percent of all new jobs. Small business lobbyists typically throw around the stat that 70 percent of all new jobs in the U.S. are created by small businesses, but this report suggests that may not be entirely accurate, as the key is not just that the business is defined as “small”, but rather that it be defined as “young”. According to Robert Litan, one of the report’s authors, this is more than a mere semantic debate.

“This study sends an important message to policymakers that young firms need extra support in the early years of formation so they can grow into viable job creators,” Litan said in a statement. “Sometimes a single barrier, such as limited access to credit for business growth, can mean the difference between survival and failure. We must create an environment that aids firm formation and growth if we are going to turn employment around.”

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In 2002, there were approximately 23 million small businesses in the United States according to the US SBA (Small Business Administration).

 

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