Small-business job creation: real or fantasy?
February 9th, 2012, 3:00 am ? ? posted by Jan Norman, small-business columnist
More than one in five small-business owners?(22%) expect to add jobs over the next 12 months, while 8% expect to eliminate jobs, according to the new Wells Fargo/Gallup Small Business Index poll.
This is the most optimistic owners have been in four years, Gallup says.
Small-business owners tend to be optimistic. Otherwise, how could they stand the uncertainty of the business world and the economy? Their role in the economy is significant: half the gross domestic product, two-thirds of the net new jobs over the past 15 years.
Wells Fargo/Gallup releases this poll quarterly. Small businesses are defined as having annual revenues of less than $20 million.
How did past expectations compare with what small businesses actually did about jobs?
First, the chart below shows owners? future expectations about job creation vs. layoffs:
Source: Gallup
Note in the chart above that at this time year ago, 23% said they expected to add new jobs and 11% expected to eliminate them over the next 12 months. Also take note that in quarter in 2010, 13% said they would add jobs, 18% said cut jobs; and in mid-2007, 29% said they would add jobs, the highest point on the chart.
Here?s what poll respondents said they actually did in the past 12 months:
Source: Gallup
In the past 12 months, 22% cut jobs and 13% added them, the reverse of what owners expected they would do. The 2010 and 2007 expectations were also overly optimistic.
Even though owners told Gallup they expect to add jobs, 36% said they would add temporary or contract workers, 36% said they would add part timers and 26% said they would hire full-time, permanent employees.
The point is to be cautious about reports that small business owners are more optimistic and planning to hire again. Gallup acknowledges this tendency:
?Small-business owners have often expected to increase hiring in recent years but later reported that they actually eliminated more jobs than they created. So it remains to be seen whether the greater expectations for hiring in the next 12 months will become reality.?
Still, these intentions are in line with Gallup?s January job creation index and decline in the unemployment rate. The government?s report on jobs shows the same trend.
Other small-business surveys are reporting greater owner optimism.
In the National Small Business Association?s 2011 Year-End Economic Report, 75% of owners of businesses with fewer than 500 employees are confident about the future of their businesses up from 64% six months earlier and the highest level in three years.
?Despite some cyclical ups and downs we?ve seen in the past several years, this report indicates real growth for the small-business community,? stated NSBA President Todd McCracken. ?Although we are far from where we need to be, it appears that small businesses have turned an economic corner.?
A separate survey from Citibank of owners of businesses with more than $100,000 annual revenues and 100 or fewer employees found that 26% of respondents plan to increase their permanent full-time employees, up from 14% a year ago. (Remember the earlier caution about hopes vs. reality.)
?The survey revealed an increase in hiring intentions from small business owners ? the largest we?ve seen in two years,? said Raj Seshadri, head of small business banking at Citibank. ?Whether it?s confidence in consumer spending or planning for growth, our survey shows momentum for small businesses in 2012.?
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Source: http://jan.ocregister.com/2012/02/09/small-business-job-creation-real-or-fantasy/77497/
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