Small-Business Hiring May Signal Recession End

New data matches hiring pattern of last recession

A small-business hiring spike in the fourth quarter may be asignal that the economy is poised to rebound. If so, it would be arepeat of the hiring pattern when the 1990-1991 recession nearedits conclusion.

Challenger, Gray & Christmas Inc., said Thursday that 67percent of job seekers went to small businesses in the fourthquarter. That marked a dramatic 22 percent increase from the secondquarter level of 55 percent, which came on the heels of therecession's official start last March. The second-quarterfigure was the lowest figure since 53 percent was recorded in thethird quarter of 1990, which is when the last recession began,according to the National Bureau of Economic Research.

The recovery from recession which began in April 1991 waspreceded by a first-quarter jump in the percentage of job seekersgoing to small firms, to 69 percent, 30 percent higher than the 53percent recorded two quarters earlier. "The similarity betweenthe current situation and 1990-1991 is not a coincidence,"said John A. Challenger, CEO of Challenger, Gray & Christmas."Small businesses are less insulated from changes in theeconomy compared to large corporations. {They] are simply bettersuited to react quickly to those changes because they lack thebureaucracy common in most large corporations."

As the nation's largest employer and biggest job creator,small businesses--those with fewer than 500 employees--are acritical bellwether to the overall health of the economy. Accordingto the SBA, these firms create about three-quarters to two-thirdsof the net new jobs, depending on the year studied. Theagency's latest statistics show that 68 million, or 58 percent,of all private-sector employees worked for small firms in 2000.

"Today, small businesses should be monitored for signs ofglobal economic trends, since an increasing number have growingvolume in the import and export of goods and services. TheInternet, which has made the world a smaller place on so manylevels, has been a leading factor in the small-business expansioninto the global marketplace," said Challenger.

A 1998 study by the International Trade Administration foundthat small enterprises accounted for over 97 percent of the growthin the number of U.S. exporters between 1992 and 1997, which nearlydoubled from 108,000 to 202,000. Very small companies, those withfewer than 20 employees, made up 65 percent of all U.S.exporters.

"Job seekers often discover that smaller firms are able tooffer flexibility when it comes to balancing work and family. Thishas become increasingly important to many workers, particularlysince September 11," observed Challenger. "Smallbusinesses can also be ideal for those seeking to make a definitiveimpact on day-to-day operations and the bottom line of theiremployer. Lacking the money, time and personnel needed forextensive training, small firms need people who can hit the groundrunning and are able to contribute immediately."

The Challenger data is based on a Job Market Index of 3,000discharged managers and executives from a variety of industriesacross the United States.

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