The recent trend of decreased hiring rates have some fearing a slowing of the labor and market economic recovery. While many analysts have attributed December’s decrease in growth to the uncharacteristically cold weather prompted by the polar vortex, it is becoming clear that hiring overall is going down.
The U.S. added fewer jobs in January, with employers adding only 113,000 people to their payrolls. Although this did surpass the December total by 75,000, it fell far short of the projected 180,000 jobs that were anticipated for the month. While some may see this increase as negligible, the corresponding unemployment rate is down from 7% in November to 6.6% in January, the lowest it has been in 5 years. Although this change has been welcome, it is possible to lower that number further by presenting the micro business community with sufficient means to access capital.
In Jeff Stibel’s testimony to Congress in December 2012, the CEO of Dun and Bradstreet Credibility Corp., addressed many of these concerns. He asserted that contrary to popular belief, the smaller the business is, such as a micro business, the more rapidly its sales will rebound from the recession. That being said, compared to past recessions, job growth (especially in smaller businesses) has been relatively slow. This may be attributed, at least in part, to the fact that while micro businesses are growing in annual revenue, they are able to add fewer jobs than their larger counterparts. This is due, in large part, to the lack of bank loans tailored to the financial needs of a micro business.
Understanding and amending this paradox in growth could be essential to further our movement out of recession. While small businesses employ nearly half of the private sector, they also contribute, on average, two-thirds of all new jobs. To help ensure future employment increases, it is important that smaller businesses have the necessary revenue to hire. Whereas for large businesses, attaining financing is relatively easy, micro businesses struggle to access the capital they need to thrive. This discrepancy in securing loans is problematic, as we have seen that these smaller businesses both add to job growth and economic recovery.
In the words of Jeff Stibel, “Helping small businesses access capital is vital to our nation’s recovery.” For these companies to gain the fiscal backing essential for their success, they must first have adequate access to capital and be educated on how to access that capital. From that point it may only be a matter of time before we see the substantial jumps in both employment and GDP that we have been waiting for.
Photo Credit: Dita Margarita, Flickr