The Wall Street Journal
By: Sarah E. Needleman
October 7, 2010
Hiring momentum among small businesses reversed course last month following eight months of modest growth, a national report released Wednesday shows.
Businesses that employ fewer than 50 workers cut 14,000 jobs, as did businesses with between 50 and 499 workers, according to payroll company Automatic Data Processing Inc. and consultancy Macroeconomic Advisers LLC.
Prior to September, small businesses had been adding a few thousand jobs every month since January. But those gains were in no way comparable to what happened when the last economic downturn came to an end in 2003, says Joel Prakken, senior managing director and co-founder of St. Louis-based Macroeconomic Advisers. "Small businesses in that scenario were adding a lot more jobs than they have been recently," he says.
Back then, small businesses also were the first to re-build their work forces, but that hasn't been the case so far this time around. "There's no evidence small businesses are going to lead us out of this," says Mr. Prakken. "On the other hand, there's no evidence that any businesses are leading us out of this."
To be sure, small businesses with fewer than 50 employees did add 6,000 service-sector jobs last month. But the growth was muted by a loss of 20,000 jobs at businesses of the same size in the goods-producing sector, which includes companies in manufacturing, construction and resource extraction. Goods-producing businesses with between 50 and 499 employees eliminated 12,000 jobs.
Goody Clancy Inc., an architecture firm in Boston, laid off two employees last month, following 20 layoffs earlier in the year, and now has a headcount of about 100, says David Dixon, principal. "We don't have lots of reserves, so we have to stay ahead of where we think our workload is going and where the economy is going," he says. "We cannot afford to be wrong."
Goody Clancy has in recent months brought on some new talent, says Mr. Dixon, only those people have expertise in areas where the firm is growing unlike those workers who were let go. "When a really tough economy like this hits, it forces us to take a look at who's going to thrive," he says. "Most of the people we laid off are the people who don't fit as well."
Some small-business owners say they haven't had to eliminate positions since last year or at all during the recession, but they're still not expanding their headcounts anytime soon due to uncertainty about the future.
"The fear of the unknown is always greater than the known," says Ethan Siegel, chief executive officer of Orb Audio LLC, a speaker manufacturer in New York with eight employees.
Sales are up compared with last year, says Mr. Siegel, but while he could use a few extra hands, he's not comfortable creating more jobs. "We don't want to hire someone we can't make a commitment to keep if six months down the road the economy stays cool," he says. "We might not need them."
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