Small Business Job Creation Stumbles

Businessman pushing a car
Businessman pushing a car

Many experts say that small businesses create most of the new jobs in America. But entrepreneurs struggled over the course of the recession as banks withdrew lending to these companies, most of which had modest balance sheets. As the economy recovered, apparently the appetite of small businesses to add workers did as well. That has ended, based on new research. And the end likely means that job growth in America faces risks.

According to a new Gallup poll:

U.S. small-business owners expect to add fewer net new jobs over the next 12 months than at any time since the depths of the 2008-2009 recession, according to this November's Wells Fargo/Gallup Small Business Index survey. Small-business owners' net hiring intentions for the next 12 months plunged to -4 in November, down from +10 in July and matching the previous record low recorded by the Wells Fargo/Small Business Index of -4 in November 2008.

Put another way, small businesses view the economy as back in a recession and have started to act accordingly.

Gallup did not ask what the causes of the pessimism might be. So, it is hard to say whether the trigger is the fiscal cliff or a more general perception of a slowing economy.

Data from organizations that represent huge businesses, including the Business Roundtable, nearly match those posted by Gallup for small businesses. The Business Roundtable's last CEO Economic Outlook Survey showed that expectations for corporate revenue and job additions had dropped from the second quarter to the third quarter of this year. In the past several days, the organization made an appeal for Congress and the White House to act immediately to pass legislation to avoid an economic catastrophe next year:

CEOs of leading U.S. companies who are members of the Business Roundtable are urging Washington to take immediate action during the "lame-duck" session of the 112th Congress to achieve a resolution to the pending "fiscal cliff" in order to move our nation forward and continue economic growth and progress on job creation. If Congress fails to act during the lame-duck session, the country will be hit by nearly $6 trillion in higher taxes, $1.2 trillion in automatic spending cuts to our nation's defense and safety-net programs, and our nation's credit will be harmed.

When both large and small American businesses begin to retreat in terms of both job additions and capital investment, the odds of an ongoing recovery in 2013 move toward zero, at least if the recovery has a foundation in business activity.


Methodology: Results for the total data set are based on telephone interviews with 607 small-business owners, conducted Nov. 12 to 16, 2012. For results based on the total sample of small-business owners, one can say with 95% confidence that the maximum margin of sampling error is ±4 percentage points.

Douglas A. McIntyre

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