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The New Economy

Small business posts top job losses again, ADP says

Small businesses post higher job losses than mid-sized companies for a second straight month.

By / September 30, 2009

Store closing signs popped up at this San Jose, Calif., furniture store earlier this year. In August and September, small businesses were responsible for more layoffs than large and mid-sized ones, according to a report Wednesday.

Paul Sakuma/AP/File

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America's smallest businesses are falling into a strange funk.

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For the second month in a row, they've laid off more workers than mid-sized or large employers, according to an ADP employment report (.pdf) released Wednesday. That's a first. Until August, small businesses (those with fewer than 50 workers) had never been the biggest generator of layoffs since ADP began tracking the figures in 2001. The September figures, released Wednesday, confirm the trend.

Certainly, job losses aren't as dire as they were earlier this year. The US lost 254,000 jobs overall in September, the smallest decline in employment since July 2008, according to ADP. Layoffs at small businesses were also far less severe than at their March peak (100,000 vs. 288,000).

But mid-sized businesses (50-499 employees) have made far more progress during that time (93,000 vs. 324,000). And large companies (500-plus employees), whose employment numbers were consistently worse than small business's from October 2001 through the first six months of the recession, now regularly lay off fewer workers every month.

All this is unusual because for most of the last eight years, small businesses have done the most hiring and least firing, according to the ADP numbers. The recession changed that.

"We've never seen anything like it," says William Dunkelberg, chief economist at the National Federation of Independent Business. From the last quarter of 2008 through the second quarter of 2009, the NFIB found more job losses per small firm than at any time in its 35 years of surveys.

The collapse in consumer spending is behind much of it, he says. Some 35 percent of small businesses are retailers and restaurants, whose sales are highly sensitive to discretionary spending. The question is how quickly that spending will recover.

"People will start eating out a little bit more," Mr. Dunkelberg says. But if Americans really become savers again, then business will not return to its pre-recession levels for all those restaurateurs and retailers.

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