Small US Businesses Scrap Hiring Plans

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The overall US unemployment rate may be declining, but small businesses have eliminated their former plans to make new hires

US small-business owners’ net hiring intentions for the next 12 months plunged to -4 in November, from +10 in July, and owners expect to add fewer net new jobs in the next 12 months than at any time since the depths of the 2008-2009 recession, according to the November Wells Fargo/Gallup Small-Business Index survey.

One in five owners also expects to reduce the number of jobs at their companies over the next 12 months, suggesting small-business owners are pessimistic about their operating environment as 2012 comes to a close. The report warned of the potential for a serious decline in jobs early next year if small-business owners’ hiring intentions do not improve.

Too few new jobs

In addition to asking about future hiring intentions, the survey also asked small-business owners to report on hiring over the past 12 months. In November, more small-business owners reported decreasing the number of employees (26 percent) than increasing (14 percent) them, resulting in a net hiring score of -12.That figure is down from -7 in July and -9 in the prior three quarterly measurements. Net hiring over the past 12 months is about where it was in July 2011, at -11.

tech work office HR jobs © Santiago Cornejo Shutterstock“This lack of improvement in small-business owners’ self-reported hiring helps explain why too few new jobs have been created during much of 2012 to significantly lower the US unemployment rate,” the report noted.

Worryingly, small-business owners’ self-reported hiring suggests deteriorating job growth over the past year, but not nearly as severe a decline as is implied by owners’ hiring expectations for the next 12 months.

The 14 percent of small-business owners who in November reported increasing their company hiring over the past 12 months is unchanged from July. However, the 26 percent reporting a decrease in the number of jobs at their businesses in the past 12 months is up from 21 percent in July, and is the highest level since November 2010.

Fiscal cliff

“Whether the pessimism of the nation’s small-business owners is due to the fiscal cliff, Superstorm Sandy, the election, or some combination of these factors, the US economy remains weak and unemployment remains high from a historical perspective,” the report concluded. “A further sharp increase in small-business layoffs, resulting in higher unemployment on top of the current economic conditions, could turn today’s slow-growing US economy into something worse.”

The information on small-business hiring trends comes as the national unemployment rate, which was stubbornly stuck above 8 percent until the fall, dropped to 7.7 percent, according to the Labour Department’s most recent report.

That figure marks the lowest unemployment rate since the financial crisis of 2008. “It looks like the job market is holding firm,” Moody’s Analytics chief economist Mark Zandi told NBC News. “That’s encouraging in light of all the fiscal uncertainties.”

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