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Small Business Productivity Surges in May

Small businesses are growing, but hiring is not keeping pace. Increased efficiency is the reason, says SurePayroll's Michael Alter.

The results of this month's SurePayroll Small Business Scorecard were encouraging and frustrating at the same time. On one hand, the results of our Scorecard survey found 9 in every 10 small businesses experiencing growth. Yet hiring was down 0.1% month over month, and it's down 1.5% year over year.

How do we account for this split? Why is there growth, but not hiring?

It appears that productivity has outpaced growth. In fact, 50% of our survey respondents said exactly that--revenue is increasing but productivity is also increasing, so hiring is not needed right away.

This is, in some ways, good news for small businesses. They have successfully taken advantage of technology as they've come out of the Great Recession, so that they can do more with less. They are using tools that allow for more efficiency, whether it's for getting contracts signed, tracking shipments, running payroll, or managing customers. Small business owners have shown their ingenuity and resilience, maneuvering through one of our tougher economic periods without any real guidance from the government.

As a business owner and operator, it's not a bad thing when you're growing and your productivity is growing even more.

At the same time, it's a problem for the economy because small businesses are not hiring. The economy needs hiring, yet many small businesses currently aren't. When the interests of small businesses get out of line with those of the economy, it becomes hard to make progress.

It makes for an unusual recovery. Historically, in a recovery you see hiring bounce back as revenue bounces back. This one is different, making the fallout from the Great Recession that much harder to get a handle on. 

Last updated: Jun 1, 2012

MICHAEL ALTER | Columnist | President of SurePayroll

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.

The opinions expressed here by columnists are their own, not those of

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