Wednesday, August 8, 2018
Even with the U.S. economy booming and the job market strong, hiring has slowed among one category of employers: Small businesses.
Yet it isn’t because these companies are hurting. Far from it. Small businesses today are generally optimistic, and most say they’re enjoying healthy sales.
Rather, smaller companies are being hamstrung by the economy’s very strength: Low unemployment has shrunk the pool of job seekers and intensified competition for workers. And smaller companies are in many cases losing out to larger employers, which typically can offer more generous pay and benefits. Some larger businesses are also using their financial muscle to poach employees from smaller companies.
Also contributing to the slowdown in hiring by small businesses is a more discouraging trend: Americans are forming fewer companies. It’s a trend that began roughly three decades ago and worsened after the Great Recession. Fewer people could afford to start businesses as the availability of funding, such as borrowing against a home, began drying up. In addition, some industries, such as retail and banking, are increasingly dominated by huge chains, thereby discouraging smaller competitors.
Americans started 414,000 companies in 2015, the latest year for which data is available, compared with an average of 524,000 annually in the five years before the recession, according to Census data.