November 23, 2014

Are Small Firms Hurting Too Much to Save Us?

Life in Research Land has been very, very slow for a few months now, but, for at least a few minutes, that’s going to change. The big story in this month’s research is that the Census Bureau has released the nonemployer data for 2009 (which I have been eagerly awaiting, even if nobody else has).

But first …

businessman hurting

Got jobs? ‘Fraid not.

A report out this month from the Kauffman Foundation warns that firms are starting smaller and staying smaller than is suggested by historical norms.  The paper, entitled Starting Smaller; Staying Smaller: America’s Slow Leak in Job Creation, argues that “since the middle of the last decade and perhaps longer, the growth path and survival rate of new businesses mean they are generating fewer and fewer new jobs.”

For example, the set of firms that got their start in 2009 are on a path to create 1 million fewer jobs than might have been expected a generation ago. Of course, the firms that got their start in 2009 had that little recession problem to deal with, but presumably, the researchers at Kauffman took that into account.

Presumably.

The paper also had a stern word or two for folks like me who see the self-created jobs of nonemployers as a positive development that needs to be added into the statistical mix. That’s a false hope, says Kauffman. Those self-employed folks don’t make enough money and there isn’t enough work in the economy for the rise of nonemployers to get the job done — no pun intended.

Speaking of nonemployers…

Yes, fans, the new nonemployer numbers are out. The year is 2009 and, like everybody else in the economy, these nano-businesses were getting beaten up pretty badly that year.

For the second year in a row, the number of nonemployers declined a little, dropping from 21.3 million to 21.1 million. Overall revenues dropped by a painful 10 percent, down from $930 billion to $837 billion, while annual average receipts declined by almost $4,000, or 9 percent, from $43,645 to $39,723.

As far as the business population goes, the goods-producing sectors and the financial and real estate sectors are where most of the losses were concentrated. Services sectors continued adding firms, but not enough of them to make up for the carnage elsewhere.

Earnings is where the real pain was felt. There was not a single industry sector that did not experience a decline in receipts — again, no surprises there.

3 Comments ▼

Dawn R. Rivers


Dawn R. Rivers Dawn R. Rivers, an award-winning small business journalist, regularly reports and analyzes small business policy and research as the publisher of the MicroEnterprise Journal. She also publishes research at the Microbusiness Research Institute and she blogs at The MicroEnterprise Journal Blog.

3 Reactions

  1. My family hits two sectors of this report.

    My husband has chosen to start small and stay small in his retail business (Cyclopediaofredding.com), focusing instead on high touch, high educational customer experience. Employees are expensive and laws/taxes make it less desirable to add them.

    I am freelance business writer/marketer (the non-employer type). Though it is a rough go, I’d disagree with the report in its viability. At least we know we won’t get fired. And what income we create, we create.

    If the past years have proven anything, it is that there is no such thing as a sure thing, a secure job, a consistent paycheck. I believe creativity and entrepreneurship will and must rebuild our industry.

  2. I don’t see it as a negative that companies start smaller and stay smaller. Technology has expanded the productivity of each employee, so a company doesn’t need as many people to be viable. And with more large businesses outsourcing tasks to contractors or small businesses I think that a balance will be achieved.

  3. The number of “nonemployers” are going to keep raising – the reason is aging baby boomers and uncertainities in the job market. The challenge is to connect these nonemployers (consultants, contractors) to businesses. Many businesses have money to hire these individuals, but don’t act on the need because of all the hassles involved in hiring the right person, especially for a short-term role.
    – J Michael, ParetoCentral.com – Crowdsourced Confidential Consultations

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