Small Business Optimism Rebounds
In February 2009, our small business optimism survey indicated that only 48 percent of surveyed small business owners were optimistic about the small business economy. That was the lowest optimism level we had seen since September 2008.
For the March 2009 SurePayroll Small Business Scorecard, we are pleased to report that optimism has made a comeback.
Seventy-one percent of respondents indicated they are optimistic about the small business economy. The survey was completed on March 30th. It consisted of 234 respondents randomly selected from the 25,000 small businesses we use to calculate our economic indicators.
In citing why they are optimistic about the economy, 47 percent mentioned their own cash flows and revenues as their primary reason for being optimistic. Twelve percent cited the small business stimulus program as their primary reason for being optimistic. Six percent attributed their growing optimism to the recent performance of the stock market. The remaining optimists cited a variety of other reasons, ranging from long waits at local restaurants to strong faith to a belief that the typical economic cycle is running its course.
When optimism hits this level, it's our feeling that it's a clear sign the economy has turned the corner.
The SurePayroll Hiring Index
Our SurePayroll Hiring Index rose 27 points to 11,368 in March, up from 11,341 at the end of February. This represents a 0.2 percent increase in the average small business size, meaning that on average small businesses were hiring last month.
The Hiring Index is calculated from the actual payments made by over 25,000 small businesses that use our payroll service. It's a group that serves as an excellent proxy for all small businesses across the country.
For Q1 2009, the Hiring Index was up 0.8 percent. On an annualized basis, that puts hiring on track to increase 3.4 percent for calendar year 2009.
Given the difficult economy, that's a very strong showing for small businesses.
Salaries...Down Again
Bad news if you are looking for a job…small business salaries declined again in March.
Our SurePayroll Pay Index now stands at 1,010, down from our February reading of 1,019. That's a one-month drop of 0.89 percent. In the prior month, salaries dropped 0.81 percent. That's two consecutive months of deep salary cuts. In fact, we have to go back to December 2004 to find salary declines that exceeded the February 2009 and March 2009 drops.
The average small business annual paycheck in the United States is now $31,039. In March 2008, it was $32,579.
For business owners, it's a buyers market. Employees can be hired for less money, and that drops right to the bottomline for the business. So, businesses that are doing well enough to hire are enjoying higher profits, assuming they are not having to lower their prices to stimulate demand.
Fewer Employees, More Contractors
We track how dependent small businesses are on independent contractors with the SurePayroll Contractor Index.
As of the end of March 2009, the Contractor Index now stands at 3.88 percent.
This means that for every 100 workers engaged by small businesses in February, 3.88 are 1099 independent contractors and 96.12 are W-2 employees
This is up from 3.82 percent in the prior month. It's also a record high for the Contractor Index.
In other words, more than ever before, small business owners are opting to engage an independent contractor rather than hire an employee.
In a down economy, this is exactly what we expect to happen. Would-be employees don't have much bargaining power in this market, so they cannot demand full-time positions. Instead, they agree to work as independent contractors.
That's great for employers because the owners pay less in payroll taxes and are not obligated to pay benefits. However, it puts the contractors in a difficult position, especially if they are new to contracting and end up being surprised by the self-employment taxes they will have to pay.
Regional and State Performance
The Midwest, Northeast and South experienced hiring growth in March. The West was the only region that experienced a hiring contraction in March.
Monthly hiring gains for these regions were 0.5 percent, 0.6 percent, 0.4 percent and -0.2 percent, respectively. The Northeast led the country in small business growth for March.
In March, average salaries declined in all four regions. In the Midwest, Northeast, South and West, salaries declined 0.6 percent, 1.3 percent, 0.9 percent and 0.2 percent, respectively.
With respect to year-to-date performance, hiring changes for the Midwest, Northeast, South and West are 1.6 percent, 2.2 percent, 1.4 percent and -0.6 percent, respectively. Year-to-date salary changes are -0.8 percent, -2.2 percent, -2.1 percent and -0.1 percent, respectively.
As depicted in the graphic below, year-to-date results vary by state. The Scorecard comprises data from all 50 states, but we pay close attention to states that we have earmarked as "benchmark states," specifically Arizona, California, Colorado, Florida, Illinois, Maryland, Michigan, Minnesota, Nevada, New Jersey, New York, Oregon, Pennsylvania, Texas, Utah and Washington.
Data for our benchmark states are available – just send me an email requesting the data for your state.
I welcome any questions or suggestions regarding our Small Business Scorecard initiative. You may contact me at malter@surepayroll.com or by phone at
(847) 676-8420, ext. 7229.
Best regards,
Michael Alter
President
SurePayroll, Inc.
Small Business Scorecards Archive:
