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Quelle Surprise! Lack of Small Business Hiring Likely to Put Dent in Recovery

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The article tonight at Bloomberg, “No Job Growth for Small Business Spurs Recovery Doubt,” is a bit surprising, because so many of the people quoted in the article seem….surprised. It appears to have suddenly dawned on some economists and commentators that small concerns aren’t adding jobs, and that might have broader ramifications.

What is peculiar instead is the LACK of interest in the small business sector. In the last expansion, the overwhelming majority of hiring took place in small businesses. By contrast, big companies in the US shed jobs.

So why so little focus on small businesses? It’s drunk under the street light behavior (you do know that joke, , cop sees drunk on ground under street light, cop asks drunk what he is doing, drunk says he is looking for he keys. Cop ascertains drunk probably lost keys somewhere else, asks drunk why he is looking for keys here. Drunk says, “Because the light is better.”) It’s easy to get data about big businesses, so that’s what most analysts focus on:

Because few economic reports capture small-business statistics, some economists say investors are being misled about the strength of recovery from the longest, deepest recession since the Great Depression.

Recent numbers suggest “the official data are too heavily weighted towards bigger companies, which are doing better than credit-constrained smaller firms,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics Ltd. in Valhalla, New York. “The latter employ half the workforce.”

The data-gathering problem affects other areas of investigation. One of my colleagues, Amar Bhide, wrote a path-breaking book on entrepreneurship. Why was his book novel? Because all the previous academic work on entrepreneurs looked only at venture capital funded companies because it was easy to study them. But less than 1% of startups winds up getting venture funding. So Bhide did fieldwork on the unwashed, unstudied 99% and wrote up what he found.

It does not take special powers of observation to divine that all is not well in small business land. First, as we have noted on this blog repeatedly, credit cards are an important source of funding to small businesses, particularly for seasonal businesses and ones that buy inventory in lumpy quantities to obtain discounts, as well as to buffer short term cash flow shortfalls (the classic problem of a customer paying late). Two of the biggest players that focused on the small business market, Advanta and American Express, have exited that business, and it is hardly a secret that other credit card issuers are getting tougher on terms.

The anecdotal evidence is also strong that many small businesses are suffering. How many retail stores and restaurants do you know of that have shuttered? And there were no doubt some small businesses that in turn sell to small businesses like these.

The Bloomberg story provides further detail:

Improvement in the unemployment rate, which fell to 9.7 in January from 10 percent in December, may stall later this year if these firms aren’t hiring, and growth likely won’t meet the median 2.7 percent annual rate forecast for 2010 by 67 economists in a Jan. 14 Bloomberg News survey….

The National Federation of Independent Business’s index of small-business optimism has been near historic lows for 15 consecutive months, declining to 88 in December from 88.3 in November, the federation reported Jan. 12. During the four prior recessions, it dipped below 90 only once.

“It has been a very difficult year, and 2009 did not end on an uplifting note,” William Dunkelberg, chief economist for the federation in Philadelphia, said in the report. “Optimism has clearly stalled, in spite of the improvements in the economy.”

Twenty-two percent of the group’s members reduced employment in December, while 10 percent added workers. The federation will release its January data tomorrow.

Investors shouldn’t assume there’s value in small caps during this recovery, according to Robert Olstein, who manages the $14 million Purchase, New York-based Olstein Strategic Opportunities Fund, which focuses on small businesses.

“Smaller startups are having a really hard time,” Olstein said in an interview. “…

Lack of access to credit is also affecting small businesses disproportionately. The Federal Reserve reported Feb. 1 that banks were continuing to tighten standards for loans to small firms, while standards for large companies were unchanged….

PayNet Inc.’s Small Business Loan Index, which tracks loans of $1 million or less, was 8.6 percent lower in December than a year ago.

“In the first half of 2009, the average monthly decrease was about 20 to 25 percent, so it’s clearly a step in the right direction,” said William Phelan, president of the Skokie, Illinois-based company, which offers credit reports for banks that lend to smaller firms. Still, “demand for expansion loans for small businesses is 35 percent below its peak in 2006. That’s another indication of how far we have to go to climb out of this recession.”

“Things don’t seem to be getting any worse, but they aren’t getting any better,” the NFIB’s Wade said. Small businesses “are in a kind of survival mode. We just haven’t seen anything indicating a change.”

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31 comments

  1. Hugh

    No economic plan, Democratic or Republican, coming out of Washington makes any sense. The current idea of throwing a few small tax breaks at small business and then expecting that sector to create jobs to pull the economy out of recession and reverse the massive losses in employment just goes to show how divorced from reality Team Obama remains.

    I think it is important to point out when that 9.7% unemployment number is used that it doesn’t represent an improvement in unemployment but some very strange modeling modifications at the BLS between seasonally adjusted and unadjusted numbers.

  2. Richard Kline

    There hasn’t been any recovery. Check that: ‘we’ haven’t seen a recovery. Even ‘they’ haven’t seen a recovery; only some of ‘them.’ There has been no recovery in home prices. There has been no recovery in lending. There has been no recovery in ASB debt values. Oh some recovery is _claimed_ there, but as you’ve discussed, Yves, there is no evidence to support such claims, and substantive reasons to conclude such claims are specious. There are claims that losses of unemployment are slowing to the point where they will cease, but aside from the numerous and substantive reason to doubt the statistical bases by which such numbers are derived—not least in the massive DOWNWARD revisions to claimed numbers throughout the crisis—losing jobs more slowly does not equate to a recovery. Thus, for >90% of the populace, there has been and is no recovery. For -10% of the population, there is something of a recovery, where they are linked with/up to an inventory pop in the equity markets helped on ‘by all means necessary’ not supported by any fundamentals (outside of a few firms which never slumped). The only real recovery is for the 1% connected to firms massively and directly bailed out/guaranteed by the government, for the sometime investors/professional speculators.

    It is tempting to attribute all of this chat on ‘the happy recovery’ to professional liars cum Guvmint critters and vote-husting bloviators pumping dung-fire fumes. But to me it is more than that. Because for professional economists as a group ‘a recovery’ starts when the 2nd derivative of the trend goes positive, i.e. when things get worse more slowly. For them, technically we have entered The Recovery, even if this has nothing to do with the current state of the real economy. Why did those of the profession of economics tie themselves to such ‘techniques,’ then? There was a time when ‘the economy’ was discussed in terms of ‘employment,’ in terms of ‘wages,’ in terms of ‘production.’ Those terms have been factored out of the equation of public discussion, both in the profession of economics and the politics of the country. Why, one might ask? Well for one thing, the real economy had a decidedly inconvenient way of not conforming to the theoretical (sur)reality preferred by said economic professionals, so some way had to be found of getting that real economy out of the problem set; messing up careers needing to advance ‘n’ all. For another thing, employment and output were lefty concerns, and righties had found to their loss that even to discuss such realities empowered the working class. Cutting the left side of the economy out of the picture made a much prettier outcome for the righties: they started geting ‘the right’ answers about the economy out of the profession of its practitioners, um-hum.

    But these are secondary reasons, to me. Because for the professional speculators/sometime investors, the 2nd derivative _really DOES_ matter. When the trend slope changes, money positions need to be reconfigured. The real economy of the >90% is only of peripheral concern but the meta-economy of the money-in-motion of the -10% is defined by different trends and time frames. What we have had happen now, or let happen, is that the terms of interpretation for the real economy of the >90% have been erased from the discussion and replaced by the terms of interpretation of the -10%. In the media. In the political economy. The reality of most of us doesn’t exist in ‘the economy’ where there is ‘the recovery;’ the (bizarro) reality of the -10%, really of the >1% has completely substituted itself. So all talk about ‘the economy’ and ‘the recovery’ is ENTIRELY on the terms of the speculative class because it is entirely _in_ their terms. Their are political reasons behind this; their are professional reasons behind this; there are technical reasons behind this. But there aren’t any GOOD reasons behind this, and decidely no good OUTCOMES for the >90% of us in using their terms of interpretation which erase our reality from the political and practical equation before the discussion is even begun.

    . . . Just in case anyone out there was wondering. So the next time you meet someone who is talking about ‘the recovery,’ treat them like you would any other active psychotic talking about a ‘reality’ which doesn’t represent anything the great majority of us experience. Or try instead talking to them about ‘the collapse,’ and see what response you get. It just might be that person is one of ‘us’ and not one of ‘them,’ but simply moemtarily misled by this ‘language problem about consensual reality’ which they’ve been saddled with . . . .

    1. psychohistorian

      Nicely stated Richard. Thanks to you for your comment and Yves for covering the plight of smaller corporations.

      People are only allowed to think and talk about what big corporate media allows to be thought and discussed. That is why I don’t watch TV, wish more would escape its clutches and start seeing the world other than through the eyes of propaganda TV and press.

      Sharing our textual white noise on forums such as this is therapeutic to a degree but time and patience are passing. I am ready for some serious evolution!

      1. i on the ball patriot

        “Nicely stated Richard. Thanks to you for your comment and Yves for covering the plight of smaller corporations.”

        Ah yes … the “smaller” giants in the corporate race …

        HATE

        THE CORPORATE RACE

        A corporation is now a person,
        With rights like you and me,
        In comparison it is a giant,
        That stands higher than all of we,

        The giants have a history,
        A corporate nationality,
        They are a unique human grouping,
        A race different from you and me,

        These giant corporate people,
        Don’t share our common dreams,
        They are a race of greedy giants,
        Bonded by their profit schemes,

        So Obama is a racist,
        He looks down on you and me,
        When he favors the corporate giants,
        He scorns equality,

        He makes laws for us common folks,
        That limit what we may do,
        But the laws he makes for the giants,
        Are weak and very few,

        So consider being a racist,
        But not the Obama kind,
        Hate the corporate giants,
        And love the rest of humankind …

        Deception is the strongest political force on the planet.

      2. i on the ball patriot

        … psychohistorian … a question …

        Richard cautions us about accepting the terms that set the battlefield of debate in the wealthy ruling elite’s favor, I agree with him wholeheartedly. Yves used the term ‘small businesses’ throughout her post and never once mentioned corporations and yet you ported this over to “smaller corporations” in your comment.

        I am curious as to why, and would be interested in anyone’s comments on the relationship of one to the other and how it effects the battlefield of debate?

    2. DownSouth

      I agree with psychohistorian. This is a great comment that cuts to the heart of the problem.

      The US elite has elected to go banana republic. The situation Richard describes perfectly describes practically any large Latin American city, like, for instance, Mexico City. There you have maybe half a million people living in the luxury neighborhoods of Chapultapec, Polanco and Santa Fe, and then you have another 20+ million who live elsewhere. The trick is to make this other 20+ million disappear, to make them completely fall off the economic and political radar.

      Neoliberal economics is a black magic, deftly masquerading as science, which makes this disappearing act happen. Its marvelous potions were first conjured up by the economists at the University of Chicago and administered to those countries that fall within, as the Mexican politlogue Adolfo Aguilar Zinser put it, the United States’ “zone of influence.” It worked such wonders in countries like Mexico that the sorcerers have now decided to administer their wizardly brew to their own fellow countrymen.

    3. attempter

      Right on. This part is especially good:

      For another thing, employment and output were lefty concerns, and righties had found to their loss that even to discuss such realities empowered the working class. Cutting the left side of the economy out of the picture made a much prettier outcome for the righties: they started geting ‘the right’ answers about the economy out of the profession of its practitioners, um-hum.

  3. chas

    So, tell me again where all the fancy credit (CDO’s, CDS’s, MBS’s, etc.) created by the big banks (under the watchful eye of the Fed) has gone? To consumers to buy houses, cars, credit cards, etc. & fat bonuses to the big banksters. Are we just waking up to the fact that much of that credit should have been flowing to business (big & small) to create jobs? The horse has already left the barn. And we’re stumbling around in the barn trying to figure out why.

    When all we need to do is replace the Fed with a nonbank, independent money & credit creator. A group having a total economy perspective rather than a narrow financial perspective. All it takes is some guts. Like the people who settled this country had.

  4. UnnaturalIntelligence

    It is a testament to just how far ahead of the rest of the world America was in terms of its business environment and culture of entrepreneurship, that the economy hummed along for so long, despite broken immigration policy, financial mismanagement and mistreatment of foreigners, who have always been a catalyst for innovation going back to the gilded age, from Tesla to Sergey Brin (anyone know how the Serbian or Russian economies are doing these days?)

    As an aspiring entrepreneur, and foreign national that worked in the US for a few years, I noted two major advantages (despite the dysfunctional nature of almost everything else):

    - like-minded people
    - easier access start-up capital

    Well, credit for small business has dried up, while capital accumulates in large institutions. This will eventually undermine the culture of entrepreneurship and encourage foreign entrepreneurs to stay home, or even worse, American entrepreneurs to consider relocating abroad.

    1. i on the ball patriot

      “This will eventually undermine the culture of entrepreneurship and encourage foreign entrepreneurs to stay home, or even worse, American entrepreneurs to consider relocating abroad.”

      Where are you going to run to? This is a global financial coup.

      Deception is the strongest political force on the planet.

  5. chas

    Bring in a team of William Black, Sheila Bair, Elizabeth Warren, Dean Baker, Joseph Stiglitz, James L. Galbraith, Yves Smith, Simon Johnson, etc. to do the work for Congress to replace the Fed. They can also be members of the new National Economy Council to replace the Fed.

    No Paul Krugman.

  6. Brick

    There is a problem but I don’t perceive it in the same light as is being presented here.The problem I see is that small and medium business do not have access to capital to expand. Cash which would have been directed towards venture capital gets redirected towards high yielding perceived to be less risky gambling on currencies,commodities and shares. The solution is probably to tax unproductive investment and provide incentives for venture capital investment. The problem would be to do it in such away that a new bubble does not form.
    Where I disagree is that credit should be provided for the day to day running of a business. Some small and medium size businesses seem to have got into the mindset that not holding capital buffers is a good thing. This is changing slowly and is the reason why any recovery will be slow.Banks played a big part in this and now having reversed course, seem ill equipped to deal with the problem. Theu could for example do alot more to help small businesses with realistic planning. Some politicians will attempt to revive the bad old ways, setting up an even worse downturn in small business at the next crisis.

    1. Yves Smith Post author

      You need to read Bhide’s book. The idea you are presenting is based on the view of VC presented by academics and VCs. And per Bhide’s research, only 1% of new businesses GET VC funding. It simply is not an important factor, despite its high profile. And he looked at Inc. 500 companies too. Many of them did not take VC, or took it very late stage.

      Why would an entrepreneur give up equity and have VCs in his hair if he had ANY other way to raise money? The vast majority of startups are funded by savings, friends and family, and credit cards. VCs expect 30% returns, and their PR to the contrary, do not add as much value as they profess. I have worked a good deal on behalf of tech investors, as well with some attorneys who work with early stage companies. The attorneys to a person encourage their companies to get funding from anyone other than a VC. Suppliers or distribution channels are much better sources if the company’s success is a plus to them.

      And I beg to differ re the use of debt. Big companies are not debt free. Debt is perfectly appropriate for purchasing long-term productive assets and for short-term financing needs.

      1. russell1200

        Without over analyzing, your typical small business is probably some sort of small construction contractor, or some sort of small retail business. The problem from a policy point of view is that a huge percentage of small businesses add a lot of churn to the economy, but do not drive (up or down)the general trends.

        It is fairly intuitive (and possible incorrect) that if you can get some large business entity working within your area of political control, that there will be add ons to the smaller businesses within the area. But it is not clear how helping the Charlie’s Chicken Shacks of the world (with maybe one tech innovative company buried in amongst the Charlies) is going to push/pull the local economy out of its current funk.

        1. DownSouth

          Yes, but Church’s, Popeye’s and the Colonel are absolutely deserving of the government’s helping hand, adminstered via the TBTF banks of course.

  7. Anthony

    I read a lot of these blogs, and I draw the conclusion that so many are Ivy-league eggheads who wouldn’t recognize the common man if he met him on the street- because he rarely takes to the street. why? Because he can’t figure out that the conditions on the street were created by the greed he’s created in his corporate office. The street is nowhere he wants to be- it isn;t safe. He depends upon the street, but doesn’t want to go anywhere near it.

    I don’t have access to large lists of stats and databases… I rely on common sense, experience and a great deal of reading. A lot of folks who start small businesses do so as sole proprietorships- with their own funds to start. They’ll dip into savings or home equity to do so. If home equity has been destroyed over the past several years, and savings- that were barely if at all there- are not available to start small businesses, and small business drives so much of the job growth, why is anyone surprised that the economy is so weak (“green shoots” my ass) and unemployment keeps rising (I don’t pay attention to the unemployment rate numbers released by the BLS- they’re rigged so badly only an idiot would believe there is anything truthful about them)?

    We’re going to pay a huge price for the decisions made by those who no longer play by the rules, who are Too Big To Fail, who fail to listen to the “little guy.”

  8. charcad

    All very true as far as I can see.

    The next question is what conditions and policies might lead to small business hiring?

  9. Jim in MN

    To save time i will just Google up one of my past posts on this topic. It was obvious (yes, obvious) from the start over a year ago that small business credit was the connecting mechanism between Wall Street and Main Street, and that correct analysis and policy would be the difference between a huge disaster and a much huger one.

    The only surprise here is the complete wall of incompetence and complacency within the economics and policy professions. It’s like having the economic equivalent of war and picking up a butterfly net. Because it’s, like, handy and pretty easy to use. The consequences of this historic failure of key professions are plain.

    Krugman’s blog, April 2009 http://krugman.blogs.nytimes.com/2009/04/06/its-1930-time/

    “Sadly, we are experiencing the bank runs of 1930-31. In terms of their impact on economic function, today’s bitter bankers’ strike is just like having thousands of relatively small bank failures.

    Since no one even plans to try to break the strike, we are on the path to the Great Slump. Policy prescriptions for stimulus spending appear to miss the point, and are probably years too early. Instead of combating the slump, nothing is done to repair the link between the financial sector and the ‘real economy’. Precious stimulus is wasted while actual 1930s solutions like the Reconstruction Finance Corporation’s public loan officers are left in the history books.

    Paul, and anyone out there: Your knowledge of Depression policy is not standing between us and the Depression, it is causing the Depression: by increasing the damage of the Slump, for which we apparently have no policy and scarcely any analysis.

    Crash, Slump, then Depression–please analyse the correct phase of the sequence! Perhaps it is already too late, but that doesn’t excuse the policy/academic circles from getting this much right.

    Keynes and Friedman would not grade the current crop of essays kindly.

    Sheesh!

    –Jim in MN”

    From Naked Capitalism, October 2009 http://www.nakedcapitalism.com/2009/10/banks-clamp-down-on-small-business-loans-jeopardizing-jobs.html

    “Once again, with feeling: This is the mechanism that connects the financial economy with the real economy. In broad daylight, repeatedly, it is reported that this mechanism is broken and will remain broken for at least another year.

    But no one makes this a top priority issue on The Coasts. Instead we see whining about banks’ fear of realizing (existing!) losses and how risky these small businesses are.

    I’d call the Waaahmbulance for you but it’s kinda booked up these days.

    In the 1930s it took about three years, until the Chicago and Detroit collapses, for the Feds to get their act together with the Reconstruction Finance Corporation and get, in effect, public agents behind the lending desks. You simply must have a deliberate policy intervention, backed with the force of the state, to erase the word “NO” on the lending memos and instead write the word “APPROVED”.

    So what if there are some losses on new small business loans? For the most part there won’t be, and if there are these ‘mini-bailouts’ can easily be absorbed into the ‘monster bailouts’ that the billionaires are getting.

    This in a nutshell is the reason why the system has delegitimized itself. People who can’t understand this just don’t understand political economy. This is the exact thing that will turn our small-d depression into a large D Depression. Remember, we haven’t seen the next several stages in the crisis yet–you know, the ones the banks are so terrified of? How do you think employment, personal income and (oops did you forget this part?) consumer spending are going to react to several new mega-hits on top of the current debacle…with NO POLICY INTERVENTION to cushion the blow for the most critical, obvious and well-documented jobs-creating mechanism in the whole economy?

    Sad. It’s not even worth commenting on any more. But when Main Street moves to full scale revolt, perhaps a boycott of megafinance in favor of credit unions, or a debt strike, or just…stopping…don’t be surprised. Just be grateful for as much cake as was allowed you before the end.

    –Jim in MN”

    May the Lord have mercy and shine a light on us.

  10. scharfy

    Finally!!! So much energy spent on these blogs about CDS and CDO, TARP, TALF, PPiP and other acronyms unknown to 90% of working America. Average Americans have wised up to the fact that when this administration invokes the latest “acronym” – they pay the bill. We fear acronyms.

    Out here in the midwest, most people hadn’t even heard of AIG pre-collapse. Then they were told AIG was critical to the existence and of the free world and humanity itself.

    Factoids:

    Small businesses make up 97 percent of exporters and produce 29 percent of all export value.

    The latest figures show that small businesses create 75 percent of the net new jobs in our economy.

    Small businesses make up more than 99.7% of all employers.

    Small businesses create more than 50 percent of the nonfarm private gross domestic product (GDP).

    Obama, nobody out here gives a shit whether Bear Stearns or Lehman makes it, and you haven’t convinced us that we need them.

    I suspect that a 7,500 tax credit towards the purchase of a lobbyist might do the trick to help small business….? More acronyms?

  11. john

    A great post and interesting commentary.

    As best as I can tell, the MSM only covers stories where the subjects of the story can participate in its telling providing the journalists with adversarial stories through contending press releases. Bank villainy and and government incompetence are venerable narratives with available talking heads and flacks.

    Compound this with bribery (what we have been taught to call campaign finance) now intermediated (for the last forty years or so) between the voters and our erstwhile representatives and you get the banks and the government telling competing versions of the same side of the economic story that completely ignores the “real economy”. Neither our elected representatives nor their funders deal with this economy so they really don’t know much about it. It is mostly a resource available for extraction from their point of view.

    The story as it looks from here is not about credit, that is the preoccupation of that narrow band of society that occupies the corporate superstructure and high levels of government and the drunk under the street light is the apt metaphor for the circular reasoning this closed system communicates to those of us on the outside. The story is about demand: our firm provides design services for the construction industry, we grew as the Fed/Wall Street condominium pulled forward future demand with low interest rates in the early oughts and as the F/W condo through the same mechanism manufactured false demand in the late oughts and demand has now vanished entirely.

    I don’t have the skills myself to make the case formally, but my experience of construction in the NY/NJ/CT market for the last 25 years tells me that construction was the last bastion of downward wealth re-distribution in the US economy: because buildings deal with sites that are almost by definition unique, the industry has been resistant to industrial processes and capital pressure more than manufacturing or services. This has left workers with skills in a stronger bargaining position than any other sector of the economy and this has actually been more true amongst non-union skilled labor than amongst unionized workers. These workers and the multilayer construction sub-contracting business environment they inhabited represented the only dynamic, skills intensive and well paid sector of the economy open to people who preferred to learn with their hands, eyes and ears about real things rather than what the education industry likes to push. They have a reputation as leering goons, but that is as dated as the tough guy stereotype of New Yorkers.

    The sudden evaporation of this market has devastated the design profession as well, only those who are large enough to serve multinational markets actually have markets. This is howlingly, glaringly obvious and has displaced tens of millions of skilled workers from work in both design and construction but is visible to the F/W condominium only as a credit problem. We do not need credit, we need something to do. Those of us who were prudent and that was most of us I think because businesses have not closed at significant levels yet, set aside reserves to see us through a couple of years. It’s been a couple of years. I don’t want a loan, I want to pay my loans. My staff don’t want hand outs they want something to do, that would require demand. Demand, that is the problem.

    1. angryfutureexpat

      This is so dead on accurate it makes me want to weep.

      Customers and clients with money to spend. That is the problem.

      Credit to expand? Expand to serve what customer base?

      Eliminate our customers’ and clients’ debt or give them money. Sad though it may be, it’s the only thing that will save these small businesses. And there are hundreds of thousands of them – maybe millions.

  12. Nostradoofus

    Small business hiring is slowed by COMPLEX and UNCERTAIN uncontrollable costs.

    By this I mean medical insurance, worker’s comp, litigation risk, tax filings and pension management. These have all exploded in cost and complexity over the past 15 years, yet are almost completely outside the control of both employer and employee.

    It’s not just that these things have become more expensive (though they have), but that the entrepreneur has no way to forecast these costs, or to control them substantively.

    Worse yet, these matters are complicated. The solo businessperson now struggles with “attention management” — trying to get work done while making regular filings to half a dozen taxing agencies, or shopping insurers every year to minimize that 20% per year rate hike.

    The US small business hiring scene has become more sclerotic than we would like to believe. Again, it is not the COST of such things, which may be well justified. It is the UNCERTAINTY about cost, and the COMPLEXITY of managing the regulatory requirements, which put a lid on hiring.

    Contrast this with offshoring. Offshoring is hard. It suffers from quality problems. It’s not as cheap as it may appear. And yet, it does not require any of the above. Offshoring is not merely cheaper than onshore, but also vastly SIMPLER and more PREDICTABLE.

    If the small businessperson tried to do onshore what (s)he is currently doing offshore, (s)he would have a nervous breakdown. As a result, no one is hiring domestically.

    This is not how it should be, but simply how it is.

  13. lark

    One thing that has undermined entrepreneurship in the USA is the fact that people get health insurance from their jobs, and then they are effectively captive and can’t go out on their own.

    Clue, to the corporate captives: In very early stage businesses, the founders usually go without health insurance.

    How does that work out?

    From just my personal experience, 2 cases.

    1. Brilliant tech guy, got cancer during startup early stage, went bankrupt, carrying million in debt, tried to start another startup to cover his debts, that failed, killed himself.

    2. Relative starting restaurant, found himself not feeling well, no insurance, couldn’t afford a doc, went on and on, finally collapsed, ended up in the ER, critical care, 50K in debt, has a health condition which will take years off his life and require intensive management, which would have been far cheaper, easier, and less destructive to his health if treated earlier.

    Hey, this is just what one person happens to have encountered personally. Maybe this is one reason there is a higher rate of small business formation is places with better social welfare policies, like Denmark, Finland, etc.

    (Sorry for the snark, but I have gotten very annoyed by the way people with insurance have dominated the health reform conversation, and with their frequent assumption that if you are not getting it from your job you must be part of America’s enormous underclasses. There is this assumption that insuring the uninsured is sort of like insuring the Republican’s favorite target, the ‘welfare queen’. Money down the drain, in other words. Uh, no. GET A CLUE.)

  14. MyLessThanPrimeBeef

    We need green bubbles…you konw, sustainable bubbles, like the Canadian real estate market.

    OK, maybe it’s not quite a green bubble, but at least they tried.

    As it is, right now, most bubbles are driven by ‘dirty’ motivational energy – greed. Perhaps one day, we can come up with bubbles that are driven by clean energy – compassion.

    I think compassion is the only clean energy in the universe – solar, wind, etc are really being promoted by profit seeking greed, and thus is not clean in my book.

  15. angryfutureexpat

    “Small businesses ‘are in a kind of survival mode.’”

    Bingo! Not one small business owner that I know (including (my former) self) believes this “recovery” is real. Not one.

    It will take a solid year or two of improving revenue before most small businesses will even look at adding permanent workers. This is just getting started.

  16. Jon Claerbout

    You can give bargain loans to big bankers, or you could give bargain loans to companies that have in the past paid the payroll tax (in proportion to past payments). Three guesses which would supply the most jobs. Duh!

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