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Forty-two percent of all jobs created in April came from small businesses, an ADP Employment report released this morning said. Small businesses were responsible for 50,000 jobs out of a total of 119,000 created for the entire job market.
And most of the small business jobs (a total of 34,000) were created by the smallest of the small, those with under 20 employees.
And when you add in the number of jobs created by medium size businesses with up to 499 employees, we see that small and medium businesses were responsible for nearly 64% of total job growth during April 2013.
Service Sector Source of Most Jobs
Of the small business jobs created, an overwhelming majority, 41,000, were created in the service sector. If you’re thinking that means slinging hamburgers, “service sector” covers much more. It’s a large classification that includes financial, professional and business services, but also includes employees like restaurant workers, housekeepers, teachers, health care workers and retail sales workers.
Service jobs were also important to the overall employment numbers among large, medium and small businesses, officials said.
“The services sector generated the overwhelming majority of new jobs in April, contributing a total of 113,000, which helped to offset overall softness in the goods-producing sector, which was marked by a loss of 10,000 manufacturing jobs,” Carlos A. Rodriguez, ADP’s president and CEO, said with the release of this report.
Overall Job Growth Slowed, Says Employment Report
However, job growth slowed compared with previous months. Today’s report notes that the pace of job growth has hit its slowest since September 2012.
There are several factors that are likely slowing job growth, said Mark Zandi, chief economist at Moody’s Analytics. It should be no surprise that small businesses saw the most growth over the last month because larger businesses are currently weighing the expenses of providing healthcare to their employees before the end of the year, he said.
In 2013, businesses with 50 or more employees will be required to provide medical coverage to their employees or face federal penalties. This uncertain expense is a leading contributor to a lack of new jobs being created from these companies. This, along with tax increases and government spending cuts were leading factors in the weakened jobs market.
“Companies that have close to 50 employees, you have some big decisions to make,” Zandi said.
The rate of job growth in the last month is a sign that U.S. economic recovery is slowing out of the Great Recession, Zandi said. He told reporters Wednesday morning that the rate of growth is not enough to offset unemployment numbers and that similar numbers could be expected over the next three-to-six months.
“The ADP number was disappointing. The job market and economy are slowing,” Zandi said. “It’s OK but it’s certainly not enough to generate any declines in unemployment.”