Jobs Report: Why Small Business Is Still Lagging

The U.S. labor market added 120,000 jobs in November, but one survey found hiring among small businesses dropped slightly.

The SurePayroll analysis of payroll data from 35,000 small businesses across the country reported yesterday a slight drop in hiring nationwide in November. The SurePayroll Small Business Scorecard found hiring was down 0.2 percent.

This of course contrasts with the Labor Department's news yesterday that U.S. employers—of all sizes—added 120,000 jobs last month, and as a result the unemployment rate fell to 8.6 percent, after a prolonged period at 9 percent.

How can we explain the discrepancy?

Let's take a look at the results of the corollary SurePayroll Small Business Scorecard Optimism Survey from November. The survey, which measures the outlook of the small business economy, shows small business optimism holding steady at 53 percent, the same figure as last month. It’s encouraging that optimism remains off its September low of only 30 percent, but we still have nearly half the respondents feeling pessimistic.

Traditionally, optimism among small business owners is much higher—this is why they became entrepreneurs in the first place—so if we stay at about 50/50, we’re not likely going to see significant change in the small business economy.

The question becomes, how do we get optimism among small business owners higher?

It won’t be easy considering some of the larger events taking place around us: the ever-shifting European debt crisis, Congress’ inaction on deficit reduction, and a general government stalemate here at home.

In addition, the Supreme Court’s forthcoming review of the constitutionality of the health care reform law may be weighing on many small business owners’ minds. As part of our survey, we asked what impact the court’s decision would have on hiring and wages. For those that said their businesses would be affected, two-thirds of respondents said it would be positive for hiring and wages if the law is declared unconstitutional. But we'll have to wait until next year to see if the Supreme Court decides in favor of small business.

There are also positive signs. Black Friday weekend saw record sales of more than $50 billion. Online shoppers set their own record on Cyber Monday with sales of more than $1 billion. Consumers appear to be coming out of hibernation. The stock market also ended the month of November with its biggest rally in two years.

Hopefully, small businesses are seeing increased demand, as well. Small business owners can’t control what’s happening with the larger political issues right now, but they can do everything in their power to shape their businesses to meet the needs of the marketplace.

Will the positive outweigh the negative? I’m hoping small business owners see the glass as half full and continue to raise their optimism, which has the potential to lead to action by way of hiring or increasing employees’ paychecks in the near term.

More from Inc.com:

Loading...
See all articles from Inc

Friend's Activity