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Bigger Profits, Less Hiring: Main Street's Future

Profits for Main Street companies have rebounded to growth at a pre-recession pace, but new small businesses are hiring fewer workers than they used to, according to a new report from the Small Business Administration’s Office of Advocacy.

The above chart is pulled from Bureau of Economic Analysis data on proprietor’s income, which tracks the annual earnings of the owners of small companies and self-employed workers. These ventures don’t account for all Main Street profits—many small businesses file taxes as corporations—but they serve as a proxy for Main Street earnings, says Brian Headd, an economist at the Office of Advocacy.

The second chart, also drawn from data highlighted in the Advocacy report, shows new businesses taking a more cautious approach to hiring than they have in the past. This chart isn’t limited to proprietorships. It tracks the number of workers that all new businesses employ at launch.

It’s a troubling trend. “If you start with fewer employees, you may not catch up,” says Headd. And with hundreds of thousands of companies launching each year, a small shift in startup hiring trends translates into a lot of jobs.

The data reflect different but overlapping groups of companies. Together, they suggest that a dynamic that we’ve seen in larger corporations in the years since the recession has reached smaller businesses as well: Profits have bounced back, but hiring hasn’t.

http://www.businessweek.com/articles/2014-09-10/bigger-profi...