Hire Up

This story appears in the December 2005 issue of Entrepreneur. Subscribe »

Small improvements can add up to big improvements over time. And the continued slight increases in small-business hiring shown by the Sure-Payroll Hiring Index suggest that entrepreneurs are showing major resilience in a tough business environment. "We don't have robust hiring," says Michael Alter, president of SurePayroll, "but we do have positive [hiring] growth."

The index, compiled by the Skokie, Illinois-based payroll service, stood at 10,494 at the end of August, barely higher than June's 10,466. But, Alter notes, it's up nearly 5 percent from January 2004. The latest figures also mark 17 months during which there was only one down-tick in small-business hiring.

The Northeast led the nation in regional hiring. In fact, its 7 percent increase in small-business payrolls was the only increase among the regions. Alter says Northeast entrepreneurs were catching up after a rough 2004. And all employers increased their use of contractors in lieu of hiring full-time employees, a persistent trend that Alter ascribes to caution in an uncertain economy.

Salary levels, however, have not staged a rebound. Average wages for small-company employees dropped 2.3 percent for the year through August. To Alter, that suggests the troubling specter of lower consumer buying power, as prices for fuel, health care and borrowing increase. "I'm starting to get concerned about stealth inflation," he says. "At some point, that has got to come around and hit the small-business economy."

The net effect of the aftermath of Hurricane Katrina is a question mark. At issue is which will be stronger: the positive effects of spending to redevelop the affected areas or the downdraft of unemployment and business interruption among people and companies hurt by the storm. "It's going to go down before it goes up," Alter forecasts.

There's no question that small employers have so far proved amazingly resilient, which bodes well for almost all likely future scenarios. Says Alter, "To have any growth at all in the face of costs going up is impressive."