September 2, 2004 -- While the economy slowed down in the second quarter, data suggests a generally good environment for small businesses, with modest job growth, a large increase in proprietor income and stable lending rates, according to a new report from the Small Business Administration's Office of Advocacy.
The unemployment rate overall was flat at 5.6 percent, though 610,000 payroll jobs were added during the quarter. The report notes that, in the five major industries with more than 50 percent of the jobs being provided by small businesses, 180,000 jobs were added. Leisure and hospitality services hired 70,000 workers, construction added 59,000, wholesalers increased payrolls by 15,000, mining boosted employment by 8,000, and the remaining 28,000 found work in service industries, according to the Labor Department.
Proprietors' income grew at an annual rate of 14.8 percent over the first quarter, from $872.1 billion to $902.8 billion. Self-employment grew slightly, too, with 5.3 million incorporated and 10.5 million unincorporated self-employed individuals at the end of June, according to the Bureau of Labor Statistics.
For those businesses looking for capital, interest rates remained low and stable during the quarter. The prime rate was 4.0 percent and small business loans less than $100,000 averaged a rate of 4.2 percent. Rates, however, should be up in the third quarter after the Federal Reserve raised its target for short-term interest rates twice since the end of June.
One real drag on small businesses during the quarter was oil, said the report. The price for a barrel of oil ended the quarter at $38.02, up $1.26 since the end of the first quarter. The average price during 2003 was $31.14.