Large-Scale Disasters Impact Small Businesses

Analysts blame the flat employment growth of small businesses in May on natural disasters and rising gas prices. Natural disasters have a tendency to contribute to rising gas …

Analysts blame the flat employment growth of small businesses in May on natural disasters and rising gas prices. Natural disasters have a tendency to contribute to rising gas costs, and the combination of the two acts to funnel money away from the purchase of consumer goods, which ultimately hurts small businesses. This results in fewer new employees and less hours for employees currently on staff, according to Intuit’s Small Business Employment Index. For more on this continue reading the following article from The Street.

Businesses with fewer than 20 employees added 45,000 jobs in May, flat as compared with new figures for the prior month, and the likely result of high gas prices and natural disasters, according to Intuit’s (INTU) Small Business Employment Index.

Small businesses added 45,000 jobs from April 24 through May 23 — fewer jobs than original estimated for April. Small-business employees also worked fewer hours last month and compensation dipped somewhat, according to Intuit.

The data are based on approximately 64,000 small businesses using Intuit Online Payroll software. The May jobs data mean that approximately 865,000 jobs were created by small businesses since October 2009.

Intuit also revised the April employment growth rate for small businesses down to 45,000 jobs, or 0.2%, from 60,000, or 0.36% percent.

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"The rate of small-business job growth is the same as April’s," according to a statement by Susan Woodward, the economist who worked with Intuit to create the index, "but because compensation and hours dropped slightly, we can say the market for small-business employment is a bit softer than last month. However, in light of recent tumult in Japan, Greece and right here at home, it’s a comfort that small-business employment continues to improve at all."

Hourly employees working for small businesses put in an average of 107.9 hours in May, equating to a 24.9-hour workweek. Small-business employees worked an average of 108.1 hours in April, down from 109.8 hours, according to the revised figures.

"As small-business employers react to economic pressures driven by such factors as rising gas prices and natural disasters, we see the job market soften," Woodward says. "Employers cut back on employee hours when they have less work for people to do."

Small-business employees took home average monthly pay of $2,624 in May, 0.14% lower than revised April average monthly pay of $2,628. May wages equate to about $31,500 per year, which is part-time work for many small-business employees, Intuit says.

About 65% of small-business employees are hourly. Just 27% worked more than 140 hours for the month in April.

"With small businesses assigning fewer hours to employees, average monthly pay declines too," Woodward says. "Again, we see small businesses absorbing the shock of major events like natural disasters."

The index also showed that small-business employment in the "East South Central" part of the U.S. declined 0.1% in May, likely from severe flooding along the Mississippi River. The region was the only part of the U.S. showing small-business job losses, according to Intuit, while eemployment in the "Mountain" region of the U.S. rose 0.9% in May, the highest percent change in employment of all nine regions.

The monthly ADP(ADP) National Employment Report measuring changes in the private sector will be released Wednesday.

This article was republished with permission from The Street.

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