Small businesses continued to add jobs in October according to the ADP Small Business Report released today. Employment in private small business (companies with one to 49 employees) rose by 50,000 in October, the largest increase since July. Within small businesses, 37 percent of the growth was associated with companies that had between 1 to 19 employees, while 63 percent of October’s small business growth was driven by companies with 20 to 49 employees. It’s been suggested that the credit crunch for small businesses may be easing up, leading to increased confidence from small businesses owners.
There is a fear that when the “fiscal cliff”, a convergence of tax increases and spending cuts occurs in January, has the potential to throw the U.S. economy back in recession. The uncertainty is shown in the reduction of business investment. In the past few months there has been a decline in new orders for software, machinery, and durable goods. Another disturbing trend is that business formation, which collapsed during the recession and is key for long-term job growth, is very low. “This is the thing that worries me about the economy in the long-run,” says Mark Zandi, chief economist of Moody’s Analytics, which collaborated on the ADP report.
“If the construction cycle turns, that should be a big boost to small business.” continues Zandi. Many small business construction companies will probably see an increase in hiring in the wake of Hurricane Sandy which ravaged the east coast. Rebuilding will most likely created a boom on construction-related businesses, small grocery stores, hardware stores and similar businesses.
The ADP Small Business Report is a subset of the ADP National Employment Report. The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis. The report is produced by the ADP Research Institute in collaboration with Moody’s Analytics Inc.