A recent report released found the small businesses and business startups account for nearly all of the job growth in the United States in May. The snapshot of the state of employment in the country first starts with the monthly non-farm payrolls report released on the first Friday of each month. This gives an overall view of how many jobs were added in the previous month and goes on to detail which sectors of the economy were responsible for the gains. Later, the ADP jobs report details the makeup of the types of businesses that were responsible for the hiring.
The ADP report found that companies with less than 50 employees added 67,000 of the 133,000 total added jobs in May. Companies with 50 to 499 employees added 57,000 jobs, and large companies with more than 500 employees only added 9,000 jobs. This may indicate that small businesses are seeing improving conditions and that has caused an increase in their hiring.
The other Side
The June non-farm payrolls report only saw an increase of 69,000 jobs, half of what economists expected. The unemployment rate crept up to 8.2% from the previous month’s 8.1%. Finally, the 133,000 jobs from May was revised down to 82,000 jobs. This was seen on Wall Street as terrible news and sent the stock market plunging on June 1st once again igniting concerns that the economy may be going in the wrong direction. But is that true?
Advice for Business Startups
Although the most recent numbers appear to be an ominous sign, those who plan to start a business in the near future shouldn’t be deterred. First, the jobs numbers are widely seen as highly politicized and inaccurate from month to month. The news media may broadcast these numbers as front page economic news but it’s only one data point measuring one piece of a very large and complex economy.
What is the current health of your local economy and is there demand for your business even if the economy falls on hard time in the near future? That is more important than a national level data point. Also, remember that when the economy is challenged, that may be the best time to start a business. Just ask Microsoft, a company that started in a recession.
There is no evidence that the economy is heading for more hard times. One set of data doesn’t tell the entire story. Don’t put your business formation plans on hold because of some scary news reports. As we saw in May, small businesses are still leading the way in hiring and that data point is just as important as the overall jobs headlines.