Small businesses accounted for about 55,000 new jobs added during November 2011, according to an informal survey conducted by payroll processing company Intuit. Intuit collected responses from around 71,000 small businesses that use its online payroll system. It defined “small business” as one with less than twenty employees. The total number of jobs represents a decrease from October, which saw about 60,000 jobs created, but the numbers are still hopeful. Although economic growth remains sluggish, small businesses are still one of the primary sources for new job creation.
The latest employment statistics from the Department of Labor’s Bureau of Labor Statistics, released on December 2, 2011, show that the unemployment rate nationwide dropped by 0.4 percent since October, to 8.6 percent. This is a significant drop from a rate of almost ten percent in November 2009. A reduction in unemployment, of course, does not imply that all those people found jobs. It also includes people who stopped looking for jobs.
A recent article in Fortune examines job creation statistics for the past year and concludes that small businesses have created the majority of new jobs, accounting for over sixty percent of private-sector jobs. Definitions of what constitutes a “small” business vary widely, ranging from twenty to five hundred employees, which makes accurate statistics difficult to find. Using the broader definition of five hundred or fewer employees, Fortune finds an average of 60,000 new jobs per month added to the private sector in the past eight months, not far from Intuit’s numbers.
This is not to say that small businesses are doing exceptionally well in this economy. Small businesses with five hundred or fewer employees hardly constitute a monolithic group. Businesses with ten employees may have a very different outlook than businesses with just under five hundred workers. Different market sectors have responded differently to economic conditions as well. Retail businesses, particularly corner store and “mom & pop” companies. have had a vastly different experience than, for example, technology companies. The potential for small businesses to lead the charge in the economic recovery remains strong, however. The White House sought to give tax credits to small businesses as part of its jobs plan, and hopefully it will continue to seek such benefits.
A columnist for Business Insider, Yuval Rosenberg, offers a counterpoint to the exuberant view of small business job creation, pointing out that small businesses often lead the nation in layoffs. Rosenberg argues that this leads to very little net job growth overall. Newer businesses, particularly start-ups, also tend to lead the field in job creation. A significant number of start-ups fail within their first few years, taking their new jobs with them. In that sense, Rosenberg states, the truly important factor in job creation is not whether a business is small, but whether it is young.
The New Jersey business attorneys at SC Berger Law offer fixed-fee legal services to businesses, investors, and entrepreneurs who want to do business in north New Jersey and New York. To speak to a member of our skilled legal team, contact us today online or at (201) 587-1500.
The Employment Situation – November 2011 (PDF), Bureau of Labor Statistics
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New Jersey Businesses Are Eligible for SBA Economic Injury Disaster Loans, New York & New Jersey Business Lawyer Blog, December 15, 2011
New Jersey Assembly Passes Bill Creating Small Business Loan Program, New York & New Jersey Business Lawyer Blog, December 13, 2011
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