It’s Up to Small Businesses to Lead the Economic Recovery
“Small businesses have led our comeback from the downturn,” writes Maria Contreras-Sweet, administrator of the U.S. Small Business Administration (SBA) and a member of president Obama’s cabinet. “For 15 straight quarters, small firms have contributed to employment growth — accounting for as much as 80% of job gains in any given quarter.”
These statements, written in a blog post, came on the heels of the latest jobs report from the Bureau of Labor Statistics (BLS), in which it was reported that the economy added 321,000 jobs in November. Not only that, but November also marked the 57th straight month in which the economy did add jobs, the longest streak on record. Although the headline unemployment rate held steady at 5.8% and the number of unemployed held at roughly 9.1 million individuals, it’s still good news. The data shows that the economy continues to claw ahead despite sluggishness and low traction over the past few years.
The success of small businesses has long been connected to the overall strength of the economy, and with the apparent surge in hiring from the country’s smallest enterprises, it’s easy to conclude that Americans must be feeling pretty good. Contreras-Sweet credits small business growth, entrepreneurs, and startups with making the biggest impact when it comes to job growth. Contreras-Sweet also gives plenty of credit to President Obama and the success of his policies following the financial crisis and subsequent recession (although many would argue the opposite).
“This new trajectory is attributable to the success of America’s entrepreneurs and the resurgence of our nation’s small businesses,” Contreras-Sweet says. “About 7 million of the 10.9 million jobs we’ve added back were created not by large corporations, but by startups and small enterprises.”
Quantity versus quality
Now that the job market is on a positive trajectory and employment is approaching something resembling full, the conversation about the labor market has started focusing on quality rather than quantity. The total number of jobs may have bounced back, but wage stagnation has been a serious issue during the recovery. Many workers are still earning less than they were a few years ago.
According to an analysis by The Russell Sage Foundation, the all-important middle class is 20% poorer now than it was 20 years ago. This, according to the study, is because wealth losses and gains during periods of economic recession or growth are generally not distributed evenly. Pointedly, much of the wealth generated by the recent recovery has been strictly financial in nature — think of the enormous rise in stock prices. Meanwhile, much of the damage inflicted by long-term unemployment has hit middle- and lower-income Americans the hardest.
But there has been at least one glimmer of good news on the wage front. Average hourly earnings did go up, albeit slightly, for the largest increase since the summer of 2013. “Average hourly earnings for all employees on private non-farm payrolls rose by nine cents to $24.66 in November, the BLS says. “Over the year, average hourly earnings have risen by 2.1%. In November, average hourly earnings of private-sector production and non-supervisory employees increased by four cents to $20.74.”
Not all jobs are created equal
Another caveat to the November jobs report is that it typically marks the beginning of the holiday season in the United States — a season in which many companies hire en masse to ensure stores are manned and stocked, ready for the onslaught of shoppers that annually fill shopping malls and department stores. The issue with these positions is that they are typically part-time, seasonal, low-paying gigs, which may inflate employment figures but not actually create a lot of lasting value economically.
It’s still a positive thing to have people getting back to work, even if it means taking on another seasonal, part-time job, to augment current earnings. But a good portion of the jobs that were added weren’t necessarily only from the holiday hiring spree. During an interview with PBS Newshour, Diane Swonk, an economist with Mesirow Financial, says that is good news, but there is a flip-side.
“We had some really good-quality jobs, which in the last six months, we have started to see some good-quality jobs come back. That’s the good news,” she said. “Some of these full-time jobs — business services used to be something — the temporary hires is what we used to talk about. These are not temporary hires. These are full-time hires and these are full-time jobs. On the other side of it, still a large majority of these jobs are minimum-wage jobs.”
Again, though there was a bit of wage growth, minimum-wage positions are still an issue to be addressed. Now that the number of jobs (and the related unemployment rate) have returned more or less to normal, wages will be the next big item on the agenda for economists and policymakers to tackle.
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