SurePayroll Scorecard - 2008 - January - Small Business Scorecard

January 2008 SurePayroll's Small Business Scorecard Review

Recession schmecession.

That's what most small business owners appear to be saying about the economic storm clouds that have made the headlines in newspapers, radio shows and on the nightly news.

Our data indicates that the news of the demise of the economy has been greatly exaggerated.

For small business owners, the "R" word isn't Recession, it's Resiliency.

It's something that few people understand. Sure, some big companies may be struggling and some industries are hurting, but it really doesn't matter all that much.

Small businesses are ready to prop up the US economy. The cavalry has arrived, and in fact they've been here with us all along.

Small business account for 99.7% of all employer firms in the United States…and the good news is that they are hiring, according to our latest economic data.

They are the source of our hiring and our growth. Without them we would be in much worse shape. That's the key takeaway from this month's SurePayroll Small Business Scorecard.

So without further adieu, here's what's happened in the small business economy in January 2008.

Fourteenth Straight Month of Small Business Hiring

Small business owners continued to bring on new employees in January 2008.

The SurePayroll Hiring Index ended the month at 10,924, a 31-point increase (0.28%) from December. Hiring in January was up not only nationally but also in all four regions we track - the Midwest, Northeast, South and West.

January marked the 14th straight month of growth in the national Hiring Index, which is based on employee counts reported in company payroll submissions.

In a SurePayroll survey of small business owners, 80% indicated that they were not hiring new employees in January. 16% were hiring new employees, and the remaining 4% were downsizing.

One month prior, we found that 81% were staying flat and 10% were hiring new employees, and the remaining 9% were downsizing. So, in January, there was a decrease in the number of companies that were downsizing and an increase in the number of small businesses that were hiring.

Even as some large companies are downsizing, the small businesses are growing. In part, that's because larger companies are cutting their overhead but the work still needs to be done. The big beneficiary? Small businesses that are contracted to do the work.

Salaries Also Rising

Small business salaries were also up in January but only slightly.

The SurePayroll Pay Index was 1,063 at the end of January, up a modest two points from the end of December.

Interestingly, salaries dropped in the Midwest (-0.1%) and the South (-0.8%). So, the national increase in salaries was powered mostly by the Northeast (+0.2%) and a strong showing in the West (+0.7%).

Our SurePayroll Small Business Scorecard Pay Index is based on actual paycheck data to employees and contractors, but we also survey small business owners about pay trends.

Salary demands appear to be easing. In our latest survey, 29.6% of respondents indicated that they have to pay more to hire an employee this year than last year. Just a month ago, that statistic stood at 38.2% and two months ago, that statistic stood at 52.8%.

Clearly, the run-up in salaries that we've witnessed for so many months is starting to slow down. While the employees might disagree with us, that's actually a great thing. It eases inflationary pressures on the economy. On that issue Ben Bernanke and his team can rest a little easier.

Small Business Optimism Hits a Speed Bump

Small business optimism is on the run.

In January, 70.1% of surveyed business owners said they were optimistic about the economy, indicating a decline in optimism from the prior month.

Here are the optimism levels for the three preceding months:

December (77.7%);
November (75.6%);
October (64.2%); and

A drop in optimism is not surprising. The economy is getting bad press. Small business owners are optimistic by nature, but occasionally they succumb to peer pressure.

However, despite the downturn in optimism in our survey results, the reality is that small businesses added employees in January. They are still hiring on average, so clearly business cannot be that bad.

The optimists had some great responses when asked why they are optimistic. Here's a sampling:

I am optimistic because I am a small business owner. I have chosen a field that gives opportunity to those that have the drive and ambition to succeed.
Companies should still be optimistic now but watch your overhead very carefully.
There are more opportunities for small business in a bad economy since larger firms begin to outsource to smaller businesses rather than hire staff.
There continue to be new businesses starting all around us.
There is always room for small business. All big businesses started out as small businesses.
If you're in for the long haul, things turn themselves around. We're used to going through fluctuations.
The opportunities exist with continued effort. Being optimistic is the only way to run a business.
I am a positive thinker and I love small business. I live in a small town, people love to come into a small business.
There are always niches for small business. You just have to find them.
The local economy is strong, US economy is strong. Mortgage and banking problems are not a function of economy but of individual personal decisions.
My industry is stable.
In my business (law), my financial success or failure seems to be directly related to my effort.
Our business is going great. Provide a needed product or service, excel in customer service, use some "viral" marketing (online and through word of mouth), and the general economy won't affect your business too much.
There's no other way to feel after 21 years of being in business.
The economy does not feel too much different right now.
Our clients love our service and we are always looking for ways to do things better for them.
Small business runs this nation and if it shut down so would the government. So guess what? Small business will always be here and if you do the right thing for your business, its people and your customers, you will succeed.
My area is growing - we are growing.
I am the only business of my type in my location.
We secured two major contracts in the last 60 days.
Small business owners like challenges and are more resilient.
A small business can adapt to a down-swing in the economy by increasing work hours & reducing spending.
Life is good, business is good. People like our work.
Optimists are successful...pessimists are not.
Business is good if you dive in and stay focused.
The business that I'm in is relatively stable regardless of the economy.
My insurance industry is recession proof. Everyone needs insurance. They are going to be looking for a good price and good service.
New consulting work just keeps coming in the door and our existing clients continue to grow and create new projects.
My business is growing exponentially.
My optimism stems from the upcoming national election and candidates that seem to be casting a new vision of change for this country.
Small business is the backbone of our nation. Small businesses drive innovation in almost every industry.
Several new opportunities have presented themselves that were totally unknown to us previously.
It's mostly up to me. I am a home inspector. I get what I inspect, not what I expect. If I keep track of my activity and my results, then I can only get better.
I tend to think my success or failure has more to do with me and my attitudes and practices than the economy or other external factors.
Things have to get better- I have been in a uphill fight for six years. Something has to give.
I think the economy is more stable than the news would have us believe. The stock market will take off again from its current levels and will be good for the news/attitude of the economy. Also, lower financing rates will help many businesses.
Even though my income is down, I feel the economy is OK and the market should get better.
Why not be optimistic?

You just have to love the resiliency of small business owners!

Reliance on Independent Contractors Increases

Small business reliance on independent contractors was flat in January.

The SurePayroll Contractor Index ended January at 3.45%, just where we were when we welcomed in the New Year.

That means that for every 100 workers engaged by small business, 3.45 are 1099 independent contractors and 96.55 are W2 employees.

Good news or bad news for the economy? It's good news because it means small business owners are not bailing on full-time hires in favor of part-time hires. That's a vote of confidence for the economy.

Regional and State Performance

On a regional basis, hiring was up across the nation in January. Hiring rose most in the South (up 0.9%). Second place went to the Northeast (up 0.5%). The Midwest (up 0.4%) took third place and, surprisingly, the West came in last with only a 0.1% hiring increase.

Salaries increased in the Northeast (up 0.2%) and West (up 0.7%). However, salaries decreased in the Midwest (down 0.1%) and South (down 0.8%).

As depicted in the graphic below, results varied from state to state. The Scorecard comprises data from all fifty states but we pay close attention to 21 states that we have earmarked as "benchmark states": Arizona, California, Colorado, Florida, Georgia, Illinois, Indiana, Maryland, Michigan, Minnesota, Nevada, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Texas, Utah, Virginia, and Washington.

In January, firms have increased in size in 16 of our 21 benchmark states.

In January, salaries were up in 9 of our 21 benchmark states.

Data for our benchmark states are available – just send me an email and let me know if you want the data for your state.

Fixing the Economy

Our data clearly shows that the small business economy is doing just fine, thank you.

It will weather the storm. In fact, it may be the key to the entire economy's weathering the storm.

In our opinion, the way to fix the economy is not with checks to consumers to spend but with tax incentives to small businesses.

Give them rewards for hiring and training employees and incentives to invest in growing their businesses. That's the key to a rapid economic recovery. Unfortunately, consumers vote and small businesses don't…so don't expect Congress to jump on our recommendations right away.

Data for our benchmark states are available – just send me an email and let me know if you want the data for your state.

I welcome any and all questions or suggestions regarding our Small Business Scorecard initiative. Feel free to contact me at malter@surepayroll.com or by phone at (847) 676-8420 ext. 7229.

Best regards,

Michael Alter
President
SurePayroll, Inc.

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