Small Businesses Lost 61,000 Jobs in February
After gaining 195,000 jobs in December 2022, small businesses have seen a decline in jobs in January (a loss of 75,000) and February (a loss of 61,000)
Overall, private sector employment increased by 242,000 jobs in February, according to the February ADP® National Employment ReportTM produced by the ADP Research Institute® in collaboration with the Stanford Digital Economy Lab (“Stanford Lab”).
ADP Chief Ecnomist Nela Richardson said that small businesses were in a “challenging environment” and struggling to compete with medium and large businesses.
ADP Small Business Jobs Report – February 2023
Richardson said that medium and large businesses are reluctant to let go of workers. Small businesses aren’t financially able to match their salaries and any perks that are part of employment.
“Therein lie some of the challenges,” Richardson said. “In general, you need a little bit of slack. With the 3.4% unemployment rate, there’s not a lot (of employees) in the pipeline for small businesses to capture.”
Richardson also noted that when surveyed, small business owners cite “finding qualified employees” as the biggest challenge they are facing.
Small Business Breakdown
In February, small businesses lost 61,000 jobs. Businesses of 1-19 employees lost 56,000 jobs, and businesses from 20-49 employees lost 5,000 jobs.
During that time, the median annual pay rate for businesses of 1-19 employees was at 5.5%. The median annual pay rate for businesses from 20-49 employees – and also for medium and large businesses, was at 7% or higher.
“There is a tradeoff in the labor market right now,” said Nela Richardson, chief economist, ADP. “We’re seeing robust hiring, which is good for the economy and workers, but pay growth is still quite elevated. The modest slowdown in pay increases, on its own, is unlikely to drive down inflation rapidly in the near-term.”
Private employers added 242,000 jobs in February. Medium businesses added 148,000 jobs and large businesses added 160,000 jobs. Small businesses lost 61,000 jobs.
Construction Sector Job Losses
The construction business lost 16,000 jobs during February. Richardson described the job loss as “noticeably negative” and said that the industry is “interest rate sensitive.”
The higher interest rates for mortgages reduce the number of consumers who can afford to buy new homes.
Pay growth slowed in February. Pay growth for job stayers slowed to 7.2 percent in February, the slowest pace of gains in 12 months. Pay growth decelerated for job changers, too, falling to 14.3 percent from 14.9 percent.
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