Small Businesses Driving Increase in National Hiring

While some recent polls showed small business owners tend to have mixed feelings about the futures of their bottom lines, and the economy in general, it seems that they were still far more eager to take on new workers in May than larger companies with more resources.

It seems that the nation's smallest businesses were those most interested in increasing the number of workers they employ, as small businesses accounted for 58,000 new jobs last month, outstripping both medium-sized and large companies in hiring, according to the latest National Employment Report from payroll monitoring firm ADP. In all, this was driven largely by the smallest companies of all, as those with between just one and 19 employees added 37,000 jobs nationwide. By contrast, those with between 20 and 49 employees increased hiring by 21,000.

Medium and large businesses brought on some 39,000 workers each over the course of May, the report said. Medium businesses are defined as those with between 50 and 499 employees. Meanwhile, companies with 1,000 or more employees hired 33,000 people, and those with between 500 and 999 increased positions by just 6,000. Altogether, businesses of all sizes increased employment in the private sector on a monthly and annual basis. However, Mark Zandi, the chief economist for Moody's Analytics, notes that the growth seen so far in 2013 is actually a little slower than that since the year began, across more or less all industries and for most business sizes except the largest. The reason for this may be more recent tax increases and spending cuts for the federal government seen earlier in the year.

"U.S. private sector employment increased by 135,000 jobs during the month of May 2013, a slight increase over the previous month of April," said Carlos Rodriguez, president and chief executive officer of ADP.  "The majority of new jobs in May came from the service-providing sector, which added a total of 138,000 jobs, while the goods-producing sector recorded a loss of 3,000 jobs. Notably, a gain of 5,000 jobs in the construction industry during May was offset by a decline of 6,000 lost jobs in the manufacturing industry."

Hiring in specific industries varies widely
Interestingly, it was the professional and business services sector that increased hiring the most even as others came in at far less, the report said. In all, companies in this field added 42,000 jobs, with the 31,000 positions in the trade, transportation and utilities industry coming closest. At the same time, financial activities added 7,000, while the construction sector brought on 5,000 new workers.

Hiring in May standing at 135,000 new jobs is a significant improvement from the just 99,000 added in the same month last year, but is less than half of the increase seen in November 2012, when the rate climbed to 276,000 new jobs and reached an all-time recent high, the report said. The lowest point for hiring in the last year, meanwhile, came in August 2012, when companies added just 73,000 positions.

Of course, small business owners, regardless of how many employees they have or the sector they work in, should approach expansion of hiring cautiously, as doing so may come with some costs they don't consider. For instance, bringing on more workers may come with higher small business insurance premiums, on coverage types such as workers' compensation insurance or general liability insurance. Without planning for these potentially much higher prices, employers may be putting their bottom lines at significant risk, and for this reason, crunching all the numbers before undergoing a new round of hiring may be a wise course of action.