There’s the perception that, with low unemployment, job creation has been on a tear in the United States among small businesses.
Then there’s the reality.
The Wall Street Journal reports that the median small business has been adding new employees at a glacial pace, with fewer than one full-time position put on the books annually. Research from JPMorgan Chase shows that 16 percent of smaller firms lost one full-time worker, according to 2015 payrolls, while 20 percent added at least two full-time positions. The survey conducted by the bank delved into the hiring practices seen at 45,000 small corporate customers.
The findings, which tracked firms that had checking and/or savings accounts with JPMorgan with cumulative balances of less than $20 million, show that there are “economic challenges” facing smaller firms, said the WSJ. That comes as 89 percent of smaller businesses are indeed small, with 2014 Census data showing that they had fewer than 20 employees. All told, that’s 17 percent of all firms that have employees. Separately, the PYMNTS Store Front Index showed 3.7 percent growth in the third quarter of last year.
The gains themselves can be traced to companies that are just starting up and are not in fact the result of larger and older firms broadening staff or geographic presence. In an interview with the WSJ, Scott Stern, who serves as professor at the Massachusetts Institute of Technology, with a focus on entrepreneurship, said that “there is a great disconnect between the belief that entrepreneurship in general is a driver of economic growth and prosperity, and the simple fact [is] that most small businesses remain small.”
The data compiled by JPMorgan showed that employment and payroll spending show pockets of instability, with JPMorgan Chase Institute CEO Diana Farrell noting that “most small businesses do not have a steady flow of customers and a steady flow of revenue. They have good months and bad months.”