Smallest of Businesses Still Struggle

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The last couple days have brought numerous positive reports about the economy. Most show jobs climbing, others show decreased layoffs and still others indicate increased capital investment.

But what isn't being talked about is what's going on with the country's smallest businesses.

Here at SurePayroll, the majority of our small business customers have 7 or fewer employees. And while I'm happy to hear things are looking up in the job market for many segments, the SurePayroll Small Business Scorecard shows this sector is struggling.  Using a 12-month trailing average to analyze the data, both hiring and wages decreased in March from the previous month. This is the fifth month in a row hiring decreased and the second month paychecks decreased. Year-to-date hiring is down 2.2% and paychecks are flat.

With all of the other good news out there I was hopeful. I wanted to see data revealing small businesses were hiring and their employees were seeing larger paychecks that would offset the rising energy prices and a still-slumping housing market. I wish I could say that the Small Business Scorecard shows lagging action—that reality will soon be better when small businesses catch up to their workload. But the truth is, small businesses are nimble and act swiftly on their current needs, not the economists' or the media's predictions about their workload. So, when the numbers show they're not hiring, in reality they don't have enough of a workload to hire more full-time employees right now.

The good news is that with other positive indicators, things will most likely look up soon for small business employers. As large companies invest and increase spending, small businesses will see a sort of trickle-down effect. Additionally, while most aren't hiring now, they are using independent contractors – 1.5% more than last month – which tells us they have business activity, just not enough confidence or bookings to hire. But we may see that change soon too. For the second month in a row, we had a higher than average number of small business owners saying they feel good about the economy in March – 69%.  That's a 17% increase in optimism since December.

As we continue to monitor this recovery, I will be watching for signs from our smallest business owners. If we see hiring improvement over the next few months, we'll know the increased hiring and investment from big business was real – that the economy is getting its footing. If we don't, we may realize that the positive news of the day was just a blip on the economic recovery radar.

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.