Nationwide, the smallest businesses shed jobs. Here’s what that might mean in SC

Post and Courier
August 8, 2019

By Emily Williams

Nationally, businesses with fewer than 20 employees have shed 105,000 jobs since May. File/Staff

The smallest businesses in the country have been shedding jobs this summer, and some experts say the drops could be early signs of a slowdown.

Businesses with fewer than 20 employees dropped 18,000 jobs in July, according to the ADP National Employment Report, which provides a monthly look at private sector employment based on actual payroll data. That segment of businesses also saw drops in May and June for a total loss of 105,000 jobs over the last three months.

“Small businesses are the first to feel a slowdown,” said Frank Knapp, CEO of the S.C. Small Business Chamber of Commerce. “We’re the harbinger.”

Around 85 percent of South Carolina’s businesses have fewer than 20 employees, Knapp said, and small businesses employ a little under half of the state’s private sector workforce.

While businesses with fewer than 20 employees have only seen declines since May, small businesses in the next category — those that have 20 to 49 employees — added jobs in June and July but saw a small decrease in May.

In the July ADP report summary, which was released last week, Mark Zandi, chief economist of Moody’s Analytics, said that small businesses were “suffering the brunt of a slowdown.” Zandi noted labor shortages, layoffs at brick-and-mortar retailers and the consequences of “weaker global trade” as factors impeding job growth at small businesses.

Laura Ullrich, a regional economist with the Federal Reserve Bank of Richmond said she doesn’t necessarily see the declines from very small businesses as a signal of a slowdown, but she noted two different factors which may be influencing those figures: the tight labor market and the movement toward e-commerce.

Larger firms have had to get more aggressive about hiring, Ullrich said, so it may be harder for the smallest businesses to compete. E-commerce has also changed how brick-and-mortar retail operates, she said, sometimes making it possible to sell just as much product with fewer employees.

But Knapp said he believes the business community should be alarmed by the drop in jobs at very small business. Most net new jobs, he said, are coming from businesses with a handful of employees that are less than five years old.

“Start-ups are crucial to a sustainable, growing economy,” he said.

On a recent ranking from WalletHub using data from the Bureau of Labor Statistics, South Carolina ranked 38th in an analysis of the best states to start a business. The Palmetto State was out-ranked by its neighbors Georgia and North Carolina, which came in at No. 3 and No. 14, respectively.

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