Small-Business Hiring, Sentiment Drops in November

Small-Business Hiring, Sentiment Drops in November
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November was a rough month for job growth at small businesses, according to results from two recent reports.

Employment in private small business (companies with one to 49 employees) payrolls rose by 19,000 in November on a seasonally adjusted basis, according to the ADP Small Business Report released today. In October, private small business payrolls rose by an adjusted 52,000.

Related: Small Business Job Growth Continues

"The effect of Superstorm Sandy was hardest on small companies," says Mark Zandi, chief economist of Moody's Analytics, which collaborated on the ADP report. The storm, which barreled through portions of the United States during late October, caused significant damage and business interruption.

Had Sandy not occurred small business payrolls would have been roughly in line with the October figure, according to Zandi. Retailers and restaurants are heavily represented among small businesses and these companies are less likely to pay workers when they are not at work than are larger companies. Smaller businesses likely have more hourly workers while larger businesses would have more salaried workers who would be paid regardless of disruptions to their business. Some small businesses were even forced to shut down permanently.

Another report, SurePayroll’s Small Business Scorecard, released late last week, shows a similar trend in hiring. SurePayroll's compiles data from more than 40,000 small businesses, including trends affecting businesses with an average of eight employees. Data from that report shows that month over-month-hiring for small businesses was down 0.1 percent in November and the average paycheck was flat.

Sentiment, too, has been negatively affected. The SurePayroll report found that small-business owners' optimism was at 60 percent, down eight points from October. Meanwhile, 61 percent of small small-business owners surveyed felt uncertain about the government’s ability to avoid the fiscal cliff.

Small businesses are “going into a holding pattern until we get more clarity of what’s going to happen with the fiscal cliff,” says Michael Alter, chief executive of SurePayroll. “It’s very hard to make decisions absent that clarity.”

Related: Inside What Small-Business Owners Had to Say to Obama About the Fiscal Cliff

Year-end compensation is also likely to take a hit due to the uncertain economic environment. Smaller businesses tend to have more flexible bonus structures than their large counterparts and many are planning on holding back bonus money at least until they get a better understanding of where things are going, Alter says.

Results from the SurePayroll survey showed that 47 percent of small business owners will not offer year-end bonuses because they are still taking a cautious, defensive approach. Another 39 percent said they will give bonuses because the economy has stabilized to a point where they are comfortable giving them. Fourteen percent said they will wait to see how events such as the fiscal cliff and tax policy play out.

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