If small business is the backbone of the U.S. economy, business owners may need a calcium supplement. Though the numbers are moving in the right direction, many research outlets suggest that employment for small business in general, and the construction industry in particular, remain in the red.

Nightly newscasts regularly report on the national unemployment rate, which reached its peak last October at 10.1%, and remains high (in the context of U.S. businesses) at 9.5% for June 2010, the most recent month for which data was available as of press time. The U.S. Bureau of Labor Statistics confirms these numbers and also tracks employment rates and other statistics by occupation. For the construction industry, the bad news is that the unemployment rate continues to sit at more than double the national average, coming in at 20.1% for June. The good news is that this is a steep decline from peak unemployment for the industry of 27.1% in February 2010.

Less Negative, But ...

Two recent surveys of small businesses mimic these “not positive, but less negative” employment trends. Intuit, makers of QuickBooks, issued its Small Business Employment Index in late June showing employment growth of 0.09% in June and an annual growth rate of just 1.1%. This translates to 18,000 new jobs in June and 330,000 new jobs since October 2009. The index aggregates anonymous online employment data from 57,000 businesses with fewer than 20 employees.

0810_rmMW_steephill.jpg “Employment rose, but the rise was at a slower rate for June than for previous months,” says Dr. Susan Woodward, an economist who worked with Intuit to create the index. “At this point in a recovery, the labor market is still sufficiently slack, so small businesses should still be hiring vigorously. They are hiring, but not as fast as in the first quarter.”In a smaller survey issued in mid-July, the National Federation of Independent Business (NFIB) concluded that most small businesses still aren’t hiring. Average employment growth per firm was negative for 10 of the 12 quarterly readings beginning in April 2007, ending with -0.18 in April 2010, indicating a loss of about one person for every five firms. That number more than doubled in May to -0.48, and came in at -0.28 in June. Only 9% of companies reported unfilled job openings in May and June. Eight percent plan to reduce employment (up one point), and 10% plan to create new jobs (down four points), yielding a seasonally adjusted net 1% of owners planning to create new jobs, unchanged from the May reading, and positive for only the second time in 20 months, NFIB says.

Overall, NFIB’s Index of Small Business Optimism came in at 89 in June. The index has been below 93 for 30 months since January 2008, and below 90 for 23 of those months. The organization says 70% of the decline in June resulted from “deterioration in the outlook for business conditions and expected real sales gains,” adding that “owners have no confidence that economic policies will fix the economy.”According to NFIB chief economist William Dunkelberg, “the U.S. economy faces hurricane-force headwinds, and the government is at the center of the storm, making an economic recovery very difficult.”

—Lauren Hunter, associate editor, REMODELING.

This is a longer version of an article that appeared in the August 2010 issue of REMODELING.

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