Small-business hiring is picking up and could account for most new jobs this year as large companies pull back amid global economic troubles.
The heavy lifting by firms with fewer than 50 employees is likely to prop up a labor market that some economists expect to slow after posting breakout job gains of 3.1 million in 2014.
“I think small businesses will account for a larger share of job growth this year than at any time since before the recession,” says Mark Zandi, chief economist of Moody’s Analytics, which helps payroll processor ADP compile a monthly business employment survey.
Zandi says he expects small firms to contribute well over half of all payroll gains.
ADP said last week that small businesses added a solid 103,000 jobs in February and 108,000 last month even as payroll growth at larger companies slowed significantly.
The Labor Department’s more closely watched employment report Friday showed the public and private sectors added just 126,000 jobs in March, down from 264,000 in February.
Bill Dunkelberg, chief economist of the National Federation of Independent Business, expects the surprisingly weak total to be revised up, in part because Labor often doesn’t fully capture small-business hiring.
NFIB says small businesses added an average 0.18 workers per firm in March, one of the best readings in the last decade, though the share of companies increasing jobs fell. Over the next three months, 24% of the businesses surveyed plan to add workers, while just 4% expect to cut.
Early in the recovery, larger companies added jobs more rapidly than small ones in part because they could tap fast-growing international markets.
But the strong dollar is making U.S. goods more expensive for overseas buyers, disproportionately hobbling larger companies. .
Meanwhile, Zandi says, small businesses are poised to take advantage of an accelerating homebuilding market and low energy prices that have goosed consumer and business demand.
Also, small-business credit spigots that all but shut down after the recession are opening wider. Big banks approved 21.5% of small-business loan requests in February, a post-recession high, says Biz2Credit, a funding consultant for small firms.
Method Savvy, of Durham, N.C., a 16-employee marketing company, added three full-time staffers in the first quarter and plans to hire another eight to 10 this year as its revenue grows about 60%, says CEO Jake Finkelstein.
“A lot of the companies we work with are more willing to take a calculated risk,” Finkelstein says.
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