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Small Businesses That Produce Goods Have Shed More Jobs

Posted by Internet Guru
September 14, 2009

Although there are not a lot of companies for which the recession has been a good thing, the impact of the downturn has been worse for small businesses in the goods-producing sectors of the economy than for those in the service sectors.

The payroll processing company Automatic Data Processing uses information from the payrolls that it processes to create estimates of employment trends, using a methodology similar to that of the Bureau of Labor Statistics.

Using A.D.P.’s data, I examined the seasonally adjusted number of employees on nonfarm private payrolls in small businesses (defined by A.D.P. as companies with fewer than 50 employees). I compared the numbers for the goods and for the service sectors of the economy from before the recession began in December 2007 through August of this year. By setting the December 2007 employment level at 100, I have created a graph of the changes in the figure below.

In the service sector, in August 2009, employment in small firms was at 97 percent of its prerecession level. Not great but not a disaster either. In the goods-producing sector, however, employment in these firms was only 85 percent of its December 2007 level.

The difference

between what has happened to employment in the goods and service sectors isn’t specific to small businesses. The job-loss gap between the sectors is also there for big firms.

graphic1

The more severe job loss in goods-producing sectors of the economy reflects the fact that both manufacturing and construction are included in that sector. You would have to have been living in a cave for the last two years not to be aware of the housing crisis and the decline in manufacturing industries, like autos.

Scott A. Shane is a professor of entrepreneurial studies at Case Western.

source: boss.blogs.nytimes

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