Small firms slow down in hiring despite new optimism

By Jim Hopkins
USA Today

Small-business hiring, which also drives economic growth, is stuck in neutral, threatening to extend the U.S. jobless recovery.

Small firms, employing about half of all workers, added employees last month, but at a slower pace than in October, a survey of 629 firms out this week says.

Moreover, just 12 percent of such firms plan to add workers in the next three months, down from 13 percent in October, the National Federation of Independent Business survey says. Such hiring plans, which bottomed last spring, climbed to 14 percent in August before trending down.

Anemic hiring partly explains November's unexpectedly weak employment gains. Overall, U.S. companies added just 57,000 jobs last month — a third of what economists expected.

Small firms' reluctance to hire comes even if the NFIB's optimism index — tracking earnings, capital spending and other measures — soared to 105.3 last month, the highest in more than 20 years.

Why aren't they hiring?

• Revenue growth is weak. Small firms won't add workers until they've got solid order backlogs, says Rebecca Macieira-Kaufmann, chief of banking giant Wells Fargo's small-business segment.

Employers often add temporary help before they hire permanent workers, says NFIB economist William Dunkelberg. But small firms used fewer such temps in November compared with October, the trade group's survey shows.

• Productivity remains high.

Worker output per hour rose 9.4 percent in the third quarter from the second quarter, the quickest pace in 20 years.

• They're deferring hiring.

In San Antonio, Southwest Credit wants to add six workers to its existing 10 to expand its equipment-leasing business. That can't happen until March, when it expects a higher line of credit.