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Less hiring on Main Street adds more drag to recovery 10/28/02 10/28/02 Small-business hiring is declining, creating another head wind for
the nation's stubbornly sluggish economic recovery. Only 54 percent of third-quarter job seekers found new positions at small firms, Challenger reported. That's the lowest rate since the third quarter of 1990 -- the start of the last recession. The National Federation of Independent Business, the small-business advocacy group, also sees the weakness. "There is no strength in hiring plans for the balance of the year," chief economist William Dunkelberg said. Although U.S. corporations command the attention of a bearish Wall Street, the growth of new jobs on Main Street is especially important. Small businesses make up 98 percent of all enterprises in the nation and create about 65 percent of new jobs. A resumption of this type of hiring usually indicates a more palpable economic recovery. "Until small-business hiring picks up and really gets the wind behind its sails, I don't think the recovery is going to happen beyond the fits and starts of where it is now," said John Challenger, chief executive of the Chicago-based firm. "They are typically the first to hire when it is clear that things are going to begin turning around since they have to get a recruiting head start on larger companies." Persistently lackluster hiring could weigh on consumers, who have so far borne most of the burden of keeping the economy afloat. Despite slashed payrolls and devalued retirement investments, consumers continue to spend, buoyed by low interest rates. The pattern can't go on forever without the support of a stronger labor market, economists say. "If small businesses are not creating jobs -- the creation numbers have been meager of late -- that's going to continue to sap the spending power of people," said Challenger, a member of the Chicago Federal Reserve's labor/human resources committee. To be sure, the current economic environment is better than it was in the early 1990s. Today's jobless rate of 5.6 percent is lower than in the last downturn. Most economists consider the latest recession to have ended in January and to be one of the shallowest on record. "It's not surprising small business is mirroring what's going on in the overall economy," said Anthony Chan, chief economist at Banc One Investment Advisors in Columbus, Ohio. "They're hiring at a slower pace, but it is from a lower unemployment rate." Generally, small businesses didn't slash payrolls as quickly as their larger counterparts. After years of being talent-starved during the 1990s technology boom, they've been reluctant to cut staffs boosted at the peak in early 2000. "They never really fired that many people in the recession," Chan added, "so they're not going to be hiring that many people in the expansion." Another glass-half-full indicator: steady increases in temporary positions, according to Julia Vance, an economist at Economy.com in West Chester, Pa. "This hiring is good news for the macroeconomic outlook, as temporary help employment is a solid leading indicator of overall economic conditions," Vance said. In other economic reports last week: Leading indicators: The Conference Board reported that its Index of Leading Economic Indicators fell 0.2 percent, matching Wall Street expectations. It was the fourth straight monthly decline in the index. However, the board's index of current economic activity held steady. Beige book: The Federal Reserve's "beige book" report on regional economic conditions said U.S. economic growth was slow entering the final quarter of the year as a result of flattening retail sales, stalled manufacturing and lackluster hiring. The finding increases chances that the Fed will cut interest rates at its meeting in November. The report said the San Francisco district, including Oregon, has seen modest growth. It continued: "Upward price and wage pressures remained muted overall. Sales of automobiles and smaller retail items slowed a bit, and service providers reported mixed conditions. Demand for most manufactured items remained weak, due in part to limited capital spending." Existing home sales: U.S. sales of previously owned homes rose in September as low mortgage rates lured buyers. Single-family homes sold at a 5.4 million-unit annual rate last month, up 1.9 percent from a revised 5.3 million pace in August, the National Association of Realtors said. The figure compares with the record 5.3 million homes sold last year and a 6.05 million-unit pace in January that was the fastest ever. New home sales: U.S. sales of new homes rose to a record in September, spurred by inexpensive mortgages and buyers looking for a safer investment. Single-family home sales rose 0.4 percent to a 1.021 million annual rate last month from a revised 1.017 million pace in August, the Commerce Department said. Sales are on pace to reach 957,000 for the year, breaking the record of 908,000 sold last year, according to Bloomberg News calculations. Durable goods: New orders for U.S. durable goods slumped in September, the biggest drop since November, led by fewer bookings for autos, airplanes and computers, the Commerce Department said. Orders for big-ticket goods made to last at least three years dropped 5.9 percent to $167.6 billion, the lowest total since June. That followed a revised 0.6 percent drop the previous month. LOOKING AHEAD Tuesday: The Conference Board releases results of its monthly survey on consumer confidence. Thursday: The Commerce Department reports on gross domestic product. The Labor Department reports on its employment cost index. Friday: The Institute for Supply Management, formerly known as the National Association of Purchasing Management, releases its report on the manufacturing sector in October. The Labor Department reports on employment for October. The Commerce Department reports on personal income and spending for September. The Commerce Department reports on construction spending for September. Automakers announce their sales figures for October. Bloomberg News and The Associated Press contributed to this report.
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