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Small-Business Hiring Is Showing Signs of Life

Small-business hiring, the traditional engine of job growth in the US, is showing signs of picking up.

Friday's employment report, which said 140,000 private-sector jobs were created in November, was seen by some economists as evidence that small businesses were creating more jobs.

“It looks like we’re seeing small business creation, which is really critical for the long term sustainability of employment news,” Diane Swonk, chief economist with Mesirow Financial, told CNBC Friday.

The amount of small-business hiring—and where—is still unclear. According to Friday's report, payrolls rose by 50,000 in the retail sector and 33,000 in professional services. Healthcare added 17,000 jobs.

But Swonk says the numbers "may reflect more IPOs and private equity going into innovation. And we know that typically IPOs are in the technology sector."

Earlier this week, ADP’s private sector employment report showed that small businesses — those with under 49 employees — accounted for more than half of its reported 206,000 private sector jobs created in November.

"Usually, when you have that kind of a pickup, it's indicative of small businesses starting," Swonk told CNBC.com. “The ADP survey is a payroll survey, and new small businesses are more likely to use payroll services than an established business.”

"Keep an eye on small business formation; if you start seeing that, that will be a great sign. That will be getting us back to what used to be a normal recovery. " -Economics Professor, University of Chicago, Austan Goolsbee

Mark Zandi, chief economist for Moody’s Analytics, also told CNBC Fridaythat the positive household survey numbers in the jobs report indicated small businesses are hiring.

“In the last four months, we’ve created over a million household jobs, and that’s a boatload of jobs," he said. "The number from ADP for small businesses was very positive. So it feels like we’re starting to get small businesses kicking in. And that is so vital to getting the job market moving forward.”

And putting the U.S. economy on the road to recovery, said Austan Goolsbee, an economics professor at the University of Chicago and former Obama administration economic advisor. “Keep an eye on small business formation; if you start seeing that, that will be a great sign,” he said. “That will be getting us back to what used to be a normal recovery.”

Still, hiring by small businesses appears to be happening in fits and starts. Reuters reports that a monthly small-business employment index by professional services company CBIZ rose just 0.35 percent last month, reflecting seasonal hiring. The percentage of small businesses expecting to cut jobs is about the same as those expecting to add them.

And economists note that small business formation, which has suffered in the past two years as the price of homes declined, will continue to hinder small business hiring.

“This was how people started a new business, and many don’t have that option right now," noted Swonk.

While Swonk says it's too soon to tell if the gain in small business hiring will continue, "It’s a good sign—And frankly, we’ll take what we can get.”



email: patricia.orsini@nbcuni.com

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