June 4, 2004 -- Small businesses continue to make impressive contributions to the improving employment picture, shows a survey by the National Federation of Independent Business.
In its May survey of employment conditions, the NFIB found that small firms reported adding 0.2 employees per firm. Of the 587 firms responding, roughly half said they were looking to add one or more employees. Employment increased at 16 percent of the firms by an average of 3 employees. There were, however, reductions by an average of 2.5 employees at 13 percent of the firms.
The recent surge in small business job growth has coincided with a string of positive job reports out of the Department of Labor. The March increase of 0.4 employees added per small firm was the best since 1999. That same month the economy as a whole added 337,000 jobs. In April, when small businesses reported adding a historically strong 0.2 employees, payrolls lept 288,000.
The survey found job creation across every industry surveyed. Construction showed the largest percentage of firms planning on hiring, while the resurgent manufacturing sector reported the second highest.
The finance, insurance and real estate industries, which previously were the strongest job producers, have slowed in their hiring, a fact the NFIB attributes to the re-financing boom receding.
The NFIB also found that worker compensation is improving, but at a pace slower than the overall pace of inflation, which suggests wage increases shouldn't cut into profits.
MATT QUINN contributes to the Wall Street Journal's corporate finance blog. He has also written extensively about banking and corporate finance for publications including Inc., American Banker, and Financial Week. He lives in Brooklyn, New York.