Menu Close

Labor markets vs. employers’ size – some observations – Sober Look

This is a syndicated repost published with the permission of Sober Look. To view original, click here. Opinions herein are not those of the Wall Street Examiner or Lee Adler. Reposting does not imply endorsement. The information presented is for educational or entertainment purposes and is not individual investment advice.

ADP data on private payrolls has an interesting story to tell about job creation in the US. It is particularly helpful to understand job creation in terms of business size. ADP breaks down businesses into small: 1-49 employees, medium: 50-499 employees, and large: 500 and greater. Using the number of employees to define company size is not ideal, but as a payroll company, ADP only has access to employee count as opposed to something like revenue data (which is much harder to come by for smaller firms.)

Here are some observations related to payroll growth:

1. Since the beginning of 2005, ADP estimates that the US economy has generated a net of 2.6 million private sector jobs.

Source: ADP

2. During that period roughly 2.3 million were generated by small businesses, 1.3 million by medium businesses, while large businesses lost 1 million jobs.

3. While small and medium-sized business payrolls peaked in 2008, large businesses started shrinking the workforce in 2006 – prior to the recession. That makes large business payrolls more of a leading indicator.

4. Small business payrolls lag the other two categories both to the downside and to the upside – they are slower to lay people off and slower to hire.

5. Medium sized businesses had the largest and the sharpest loss of jobs (from peak) during the recession. That’s in part due to the fact that mid-market firms experienced the fastest payroll growth during 2006-2007 period (the “bubble jobs”). A good number of these firms were housing-related (construction firms, real estate brokers, mortgage brokers, small banks, etc.). That, at least in part, explains the sharp rise as well as the decline in middle market jobs.

6. Small business payrolls never fell below their 2005 level and are now near pre-crisis peak.

7. One final observation from the latest ADP data is that job growth in small businesses in recent years is almost entirely in service industries as opposed to “goods producing” (manufacturing).

SoberLook.com

From our sponsor:

Join the conversation and have a little fun at Capitalstool.com. If you are a new visitor to the Stool, please register and join in! To post your observations and charts, and snide, but good-natured, comments, click here to register. Be sure to respond to the confirmation email which is sent instantly. If not in your inbox, check your spam filter.

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.

RSS
Follow by Email
LinkedIn
Share

Discover more from The Wall Street Examiner

Subscribe now to keep reading and get access to the full archive.

Continue reading