Small Business Top Source of Layoffs

By PlanetLaundry staff | Sep 10, 2009

U.S. companies laid off fewer workers in August than at any time since September 2008. However, the news for small business wasn’t so positive.

Last month, for the first time this decade, small businesses laid off more workers than either mid-size or large employers, according to ADP’s recently released national unemployment report.

In some ways, this shouldn’t be surprising. After all, small businesses employ more Americans (48 million) than mid-size (42.5 million) or large companies (18 million) – with “large companies” defined as those with 500 employees or more. But, in the past, small companies have been insulated a bit from the chill winds of recession.

During the peak months of job losses during the last recession in late 2001, for example, small businesses never accounted for more than 30 percent of the layoffs, according to ADP. And they began adding jobs three months before mid-size companies did and four months before large employers.

This recession has been tougher. In March, when the peak job losses occurred, small business layoffs were 39 percent of the total. Last month, they represented 41 percent – a drop of 122,000 jobs, the ADP report said. Mid-size businesses laid off 116,000 and large businesses laid off 60,000.

Of course, this could be a one-month blip. But the numbers reflect last month’s drop in optimism among small business owners – the second in a row – in the monthly survey of the National Federation of Independent Business. Over the next three months, 14 percent of small-business owners in that survey planned to cut staff, while only 8 percent expected to hire staff, a net negative swing in hiring expectations from July.

“Clearly, the employment picture being painted by small business owners is not pretty,” William Dunkelberg, chief economist for the National Federation of Independent Business, said in a statement last month. “The little that was in the stimulus package for small businesses is not having the intended effect – creating jobs.”