Small Businesses Aren’t Adding as Many Jobs as Larger Companies

While the U.S. economy continues to add jobs at an impressive clip, lowered unemployment has made it more difficult for businesses to find skilled workers. Moreover it seems that smaller employers are being hit harder by this worker shortage than their larger counterparts. As ABC News notes, this has resulted in small business new job numbers taking a sizeable tumble in August while still staying in the black.

According to the Labor Department, 201,000 new jobs were created in August. Unfortunately the department doesn’t break this figure down between small and large employers. Enter payroll provider ADP who does look at hiring data among its clients and noticed a major dip in the number of jobs added at smaller companies.

In July of 2018, ADP found that its small business customers added 59,000 new jobs. That figure was more than halved (and nearly cut to one-third) in August with just 21,000 new jobs among small businesses being recorded. The August number is also well below the 49,000 jobs per month smaller employers had averaged so far this year, which itself is off from the 61,000 average seen in 2017.

This ADP report seems to echo concerns voiced in other recent small business surveys, including the latest from the National Federation of Independent Business (NFIB). While the NFIB Small Business Optimism Index did manage to reach a new record high this month, it also found more entrepreneurs concerned about the lack of skilled workers. Among businesses currently hiring, 89% said they had very few to no qualified applicants to fill their open positions. The shortage also led a quarter of respondents to rank “finding qualified workers” as their top business concern looking forward.

One potential reason that the hiring shortage seems to be impacting small businesses more than larger ones is that they may not have the funds necessary to compete with bigger businesses in terms of compensation. Although the NFIB report does show 21% of small business owners surveyed plan to increase compensation, it’s hard to imagine that many smaller businesses will be able to afford significant raises to attract workers — especially if that also means boosting compensation for current workers as well. Additionally small businesses may be more susceptible to fluctuations in demand that might put stress on their operations while larger corporations can navigate such water more easily.

Although this is far from the first we’ve heard about a skilled worker shortage, the latest ADP report really puts the problem into perspective. Of course the silver lining is that jobs are still being created by small business and larger companies alike. However, with the holiday season approaching and unemployment continuing to fall, it doesn’t seem that small businesses’ hiring woes will be going away any time soon.

Author

Jonathan Dyer

I'm a small town guy living in Los Angeles looking to make solid financial decisions. I write for a number of finance websites, including HuffingtonPost and Business2Community. I founded DyerNews.com in 2015 to focus on personal finance and the emerging FinTech markets.

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