Slow Progress on Small Business Hiring

Small business hiring, which expanded slowly by growing 0.2 percent in May, for an annualized rate of 2.5 percent, and revenue reports are improving slightly in the United States, but more work is needed before numbers are up to pre-recession levels, according to the monthly Intuit Small Business Employment and Revenue Indexes. Revenue growth was most pronounced in retail, professional services and other services, while construction and real estate industries saw marginal growth.

On the employment side, that 0.2 percent growth translates into approximately 40,000 jobs created, although Intuit noted an impending recalibration of the Index could cause the final count to change. There was a decrease in hours worked among hourly small business employees, to an average of 106.4 hours in May, a decrease of 0.6 percent from April. Average monthly pay for all small business employees also fell, to $2,688 in May, representing a decrease of 0.13 percent, or $4, from the April revised figure of $2,692 per month.

"The employment and revenue indexes tell a consistent story," Susan Woodward, the economist who worked with Intuit to create the Intuit Small Business Indexes, said in a prepared statement. "Both indicate there is a recovery under way. We need growth at this level for two more years for small business employment to return to the level we saw in early 2007." 

Revenues were flat among the health care and social services sector, along with the accommodation and food service industry. Employment grew in small businesses across the U.S., with an emphasis on the Mountain and East South Central Regions, where hiring was strongest. The top three states for small business hiring were Arizona, Colorado and Virginia, according to the report.

"The industry breakouts of the revenue indexes help us understand why the recovery is slow–construction is still far below normal," Woodward continued. "We know from other federal data as well that construction is still very depressed. Single-family construction is running about 600,000 units per year, compared to 1.5 million units per year in normal times."

The indexes provide information each month on the activity of the smallest businesses in the U.S. in terms of revenue, hiring and compensation trends. The revenue index is culled from anonymous, aggregated data from 170,000 small businesses, while the employment index aggregates data from 78,000 small business employers, a subset of users that use Intuit Online Payroll.