Owning It: Small Business

More costs equals no new jobs: IT firm CEO

Claudine Hutton, CNBC producer
Small-business owner: Shackled by unnecessary costs

Progressive Computing is keeping its CEO and co-founder Robert Cioffi busy, but not with a calendar full of new hire interviews. The 15-person, Yonkers, New York-based IT company hasn't added any new jobs since last year and expects to maintain a hiring freeze until at least 2015. The reason, Cioffi said, is that costs for the 21-year-old company are outpacing its growth.

"There is a lot of pressure to do more with less," said Cioffi. "If you look at line items like fuel, cell phones, taxes and rent, they're not much on their own, but add them up, it's a lot." Health care costs—which increase annually by double digit percentages and add up to "six figures a year" for full coverage of his employees—hit him the hardest. "That's two more bodies I could hire," he said.

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The inability of small business to create new jobs is troubling economists. Historically, they've been trumpeted as the engine of job growth, but that trend has weakened. Over the past 20 years, companies with 500 or fewer employees created about two-thirds of new jobs in this country. In 2013, that figure was just about half, according to a CNBC analysis of BLS job data.

Cioffi's frustration comes amid some encouraging signs from the entrepreneurial community. Small business confidence reached its highest level since the financial crisis in April, according to the National Federation of Independent Business (NFIB) Small Business Optimism Index, and job creation was among the categories in which small business owners surveyed by the NFIB exhibited more confidence. Additional surveys from two of the largest lenders in the U.S. showed that small business owners are more willing to hire, but using a conservative approach.

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Companies like Progressive Computing will nonetheless need robust economic growth to start hiring again. In fact, Progressive's outlook is another read on broad small business growth—its client base is primarily small business owners. "Our revenue is a function of the size of our clients," Cioffi said. "If they're not hiring, or worse yet, shrinking, then our business stagnates." he said.

The Bank of America survey showed stronger revenue and cash flow were behind the rise in small business optimism. Some 68 percent of owners said they expect revenue to increase in the next 12 months.

By Claudine Hutton, CNBC Producer