Small Businesses Continue to Drive Hiring Gains Nationwide

Over the past several months, hiring has continued to tick upward, thanks in large part to hiring by what the federal government considers to be small businesses That trend continued between July and August.

In all, private sector job numbers rose by some 176,000 in August, driven almost entirely by hiring at small and medium businesses, according to the latest ADP National Employment Report. Businesses categorized in the report as medium-sized – but still considered small by federal government standards – were those with between 50 and 499 employees, increased hiring most significantly, adding some 74,000 jobs during the month. Small businesses, with 49 or fewer employees on staff, were not far behind with 71,000.

However, within that latter number, 40,000 new jobs were added by companies with between one and 19 employees, while the remaining 31,000 came from businesses with 20 to 49 workers, the report said. Conversely, larger businesses – those with more than 500 employees – added just 32,000 jobs. That number breaks down to 5,000 new hires for companies with 500 to 999 employees, and 27,000 more for those with 1,000 or more.

“It is steady as she goes in the job market,” said Mark Zandi, chief economist of Moody’s Analytics. “Job gains in August were consistent with increases experienced over the past two-plus years. There is little evidence that fiscal austerity and healthcare reform have had a significant impact on the job market.”

Most of the added jobs came as a result of hiring in the professional and business services sector, which took on 50,000 new workers, as well as 40,000 more coming into the trade, transportation and utilities industries, the report said. The remaining new jobs came in manufacturing (5,000), construction (4,000) and financial activities (1,000).

A potential problem?
While hiring data in the August report was up significantly on an annual basis – rising to 176,000 new jobs from the previous year’s 73,000 – it was also down appreciably from the gains seen in the previous two months, the report said. In both June and July, hiring was at 190,000 new jobs or more, and that could indicate that businesses are once again growing more wary of their ability to bring on new workers as the year begins to wind down.

Certainly, data in the past few months has been a lot more mixed than the steps forward in the first part of the year. Optimism remains relatively high among small business owners in general, but at the same time many are now curtailing their plans to continue hiring, indicating that there may be something of a disconnect between what owners say they think about their companies’ chances for future success given the current economic conditions, and what they’re willing to risk. Of course, hiring is also an expensive process most of the time, and that could mean a need for added funds that some companies don’t have on hand at the present moment. But with small business lending remaining frustratingly stagnant, many may not have as much of a choice in the matter as they make like.

As a result of current conditions perhaps restraining more robust small business hiring, it might be wise for owners to look into ways they can reduce their small business insurance costs as a means of freeing up some money and giving them a little added flexibility. By finding more affordable workers’ compensation or liability insurance policies, independent companies may be able to bring aboard some workers to help them continue to grow in as healthy a manner as possible.