Labor Department data for January revealed that the unemployment rate fell to 4.9% as nonfarm payrolls rose a seasonally adjusted 151,000. This is the first instance of the unemployment rate falling below 5% since February 2008. While the number of jobs added was below the consensus figure of 190,000, the three-month rolling average still stands at a healthy 231,000, a figure that indicates that the job market is still robust.
More than half of the jobs in the country are in the small business sector where the hiring trend continues to remain positive with firms that have under 50 workers adding staff at a rate of 2.2% over the last three years. This contrasts with the growth of employment in America’s biggest companies where headcount has been rising at a comparatively lower 1.9%.
According to a report carried in the Wall Street Journal, economists are of the view that the likelihood of the country slipping into a recession is the highest that it has been at in the last three years. This opinion is prompted by falling industrial production and company profits. But this is not the signal emanating from small businesses across the country.
Data with payroll processor Automatic Data Processing Inc., and the National Federation of Independent Businesses shows that small firms are continuing to add to their payroll count. This is an indication that a recession may not be around the corner. Jessica Helfand, an economist at the Bureau of Labor Statistics, explains that small companies and businesses are quick to add workers when they see a chance to increase their business volumes and are also the first to lay off employees when the economy goes into decline.
In fact, employment in small firms started contracting two quarters before the official beginning of the last recession. William Dunkelberg, chief economist at the National Federation of Independent Business explains, “Small businesses are at the front line. They’re the first ones to notice people aren’t spending as much.”
In addition to improving employment data, the Bureau of Labor Statistics has reported that in January the number of hours worked and the average hourly earnings have both shown an improving trend. The average workweek for all employees rose by 0.1 hours to 34.6 hours in January while average hourly earnings increased by 12 cents to $25.39. Over the last year, average hourly earnings have improved by 2.5%.
Rising employment coupled with longer hours worked by employees and higher wages is an indication that businesses are finding it difficult to fill available vacancies and are paying more to retain staff. A recent Wells Fargo report released together with Gallup, supports this line of thinking as it has found that small businesses propose to continue the current hiring trend over the next year.
All these factors indicate that employment figures will retain their current momentum into the near future with small businesses providing workers with a steady stream of job opportunities. Maria Contreras-Sweet, administrator of the U.S. Small Business Administration recently observed that this sector has seen 71 continuous months of job growth.
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