Growth Stunt
Rising costs have put a damper on small-business hiring.
"The economy certainly is not overheating in the
small-business world," says Michael Alter, president of
payroll service firm SurePayroll. The Skokie, Illinois,
company's latest quarterly report on small-business payrolls,
released in April, suggests Alter may be understating the hiring
chill that's currently gripping entrepreneurs.
Year-to-date growth in the SurePayroll Hiring Index, which
measures changes in small-business size, is less than one-half of
one-tenth of a percentage point. Alter says the rising costs of
capital and fuel have made small employers cautious. Interest rates
are double what they were one year ago, he notes, and fuel costs
have skyrocketed, while business owners' ability to raise
prices is limited. "Your prices are fixed, your costs are all
going up--it's hard to hire people and grow," he says.
Some key findings of the SurePayroll Pay Index, which measures
changes in average paycheck size, include falling salaries and a
sharp increase in the use of contract employees. Year to date,
independent contractor use has grown by 2.2 percent, indicating
small businesses are becoming less reliant on full-time employees.
Wages, on the other hand, have fallen an average of 1 percent
nationwide. The sharpest declines were in the West, while wages
rose in the Midwest and the South.
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Falling wages could be bad news for the economy in the long
term. "If you continue a 1 percent decline, that's a big
annual change," Alter notes. "Consumer confidence should
decline if that continues."
But Alter doesn't expect a crisis soon. "My bet is
we're going to be on this plateau for a few quarters," he
says. "I don't think there's anything on the horizon
sending us one way or another."