American sentiment about the economy seems to be changing. The Federal Reserve reports that the "U.S. economy continues to strengthen," and our SurePayroll small business owner optimism level jumped up 12 points this month over last month, with 67 percent of small business owners telling us they feel optimistic about the small business economy at this time. Combine that with SurePayroll's April Small Business Scorecard results showing that hiring continued to increase (now at 3.4 percent year to date), and I'd say that Main Street is getting back on track.
Well, I'd say that... until I look closely at small business pay and what's driving small business hiring increases. While there is definitely more to smile about in the last few months concerning the economy, our small business workers are still struggling, seeing paychecks that are lower than they've been in years.
The SurePayroll Small Business Pay Index finally saw a few months of growth—in fact it's been stable or slightly growing each month in 2010 up until April when it dropped slightly, though pay in April remains higher than pay in January and February. I had nearly declared a trend last month, but this month the pay index decreased 0.1 percent over last, bringing us to a year-to-date increase of 0.3 percent. When we're dealing with such a small number I realize we don't need to split hairs — we can say pay is stabilizing in 2010. But in this economy, "stable" will not drive the kind of consumer spending we need to catapult production, increase the cost of products and services, and drive demand for more workers.
It's true that the Scorecard is showing that small business hiring continues to increase, but the real concern is that too much of it is still composed of temporary workers. In fact, April saw the largest month-over-month increase in reliance on independent contractors since the inception of our Small Business Scorecard in 2004. Don't get me wrong, people working in any capacity is good. However, people knowing their work could end at any time is not so good for consumer confidence.
So what is thebottom line? We can say for Main Street what the Fed is saying for the economy as a whole. Some good things are happening, but until we see more small businesses hiring full-time workers—and see those full time workers spending—it's not time to declare a full recovery.
Last updated: May 5, 2010
MICHAEL ALTER is president of SurePayroll, America’s leading online payroll service. He received an MBA from the Harvard Business School and holds a bachelor's degree in economics from Northwestern University. @michaelalter