As the United States economy takes a hit every year due to COVID or international wars, so does small business. Looking at small business trends, small business employment dropped a whopping 120,000 jobs in a very short time span. From March to the end of April 2022, the data speaks for itself. This is not good news for small businesses who are already struggling. Other sectors of the economy saw an increase in jobs during the same time period. This means that small businesses need to hold on tight because one sector ultimately affects another sector. In other words, job increases in larger companies can still be promising for small business who have lost in the same time period.
Small business drives over 44 percent of the US economy. It is an important economic indicator based on small business trends. When job losses occur in the small business sector, it is an indication of the health of the economy. A dip in employment in small business for a short time span is not anything to be concerned about. It is when the trend continues for many months.
The main reason for the job losses in April is wage competition. We see in the trends that mid-size and larger companies are adding jobs whereas small businesses are losing jobs. Small businesses have difficulty competing on a wage playing field with larger companies who can pay more for the same job. Competitive wages mean that larger companies can afford to pay their employees more than smaller businesses.
Competition in any sector in the market can affect small business. Higher gasoline prices will affect local delivery services, for example. High supply prices can force a small business to look for cheaper supplies just to stay in business. An increase in the minimum wage always affects small businesses who may already be struggling to pay their employees.
Any big change in the small business’s world can affect their business in a negative way. Savvy small businesses can change with any shift and adapt. When adaptation is not possible, then the small business may become just another small business statistic. Over half of small business startups fail within the first five years. Small business owners should always pay attention to small business trends and understand the reasons for any up or down in their sector. Staying ahead of any potential problems will make the small business life much easier and less worrisome.
From January to February 2022, there was a 9% decrease in employment in small business. This number was actually up from previous months. Even though wage competition is noted as the cause of small business job losses for the month of April, previous month’s downturns were attributed to normal seasonal downturns. Post holidays, there is always a slowdown in most economic sectors.
Paying attention to the upcoming months will give economists a clearer picture as to what is happening in small business sectors. If the job losses continue in small business, then it could be an indication of a more serious problem and not just a short-term trend.
