Small Firms See Growth as Jobless Rate Rises

While the unemployment rate soared in August and employers slashed jobs, the nation's smallest businesses continue to soldier on.

ADP, a national payroll firm, released its national employment report this week showing that firms with 50 or more employees lost 53,000 jobs in August while firms with fewer than 50 staffers gained 20,000 workers.

"Once again, we see that America's small businesses are leading the way in creating new jobs," said Todd Stottlemyer, president and CEO of the National Federation of Independent Business. "Despite difficult times -- rising health care and energy costs causing inflation to spiral upward -- small business owners are still adding much-needed jobs."

However, NFIB recently polled 812 of its members, which have an average of nine or fewer employees, and found that job creation over the last few months has been stagnant. The full poll results will be released on Tuesday.

Eleven percent of the owners responding to the survey increased employment by an average of 5.7 workers per firm, and 15 percent reduced employment at an average of 3.7 workers per firm.

"Overall, this was a better performance than in recent months, but job growth will be negative again, and the unemployment rate will rise," said NFIB chief economist William Dunkelberg.

The NFIB survey found one bright spot in that over the next three months -- 13 percent of respondents plan to create new jobs, while 10 percent plan to shed jobs yielding a seasonally adjusted net 9 percent of owners planning to create new jobs.

Another payroll firm, SurePayroll, released numbers Friday showing U.S. small businesses increased their staffs by 0.42 percent in August, which SurePayroll President Michael Alter said is the best one-month increase in hiring so far this year. Year-to-date, according to the firm, small business hiring is up 2.4 percent nationally.

Alter said owners of small firms have been able to hire new employees because salaries have dropped. Salaries at small businesses declined by 0.33 percent in August. The average annualized small business salary for a U.S. employee is now at $32,182.39. Year to date, salaries have declined 1.3 percent.

The naton's overall jobless rate was 6.1 percent last month, up from 5.7 percent in July, the Labor Department said Friday. It is the highest unemployment rate in five years, and compares to joblessness of 4.1 percent one year ago.

By Sharon McLoone |  September 6, 2008; 9:00 AM ET Data Points , Economy Watch
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