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More U.S. Small Businesses Cutting Workers Than Hiring

More U.S. Small Businesses Cutting Workers Than Hiring

by Dennis Jacobe

PRINCETON, NJ -- More U.S. small-business owners say they let employees go than hired them on average over the past 12 months, for a net hiring index of -10 in January, according to the Wells Fargo/Gallup Small Business Index. This is similar to the -12 recorded in November, the -9 of a year ago, and the -12 of January 2011, but up from the low of -27 in January 2010.

Trend: Wells Fargo/Gallup Small Business Index: Net Hiring, Past 12 Months

These results are from the quarterly Wells Fargo/Gallup Small Business survey, conducted Jan. 7-11, 2013, with a random sample of 601 small-business owners.

Small-business owners' self-reported net hiring suggests less overall hiring activity and essentially no improvement in small business job growth over the past two years. Owners reported less hiring as well as less firing in January. The 12% of small-business owners who reported increasing their company's hiring over the past 12 months is down from 14% in November. However, the 22% reporting a decrease in the number of job positions over the past year is also down, from 26% in November.

Trend: Wells Fargo/Gallup Small Business Index: Hiring, Past 12 Months

Owners Are Not Hiring For More Than the Usual Reasons

When owners who are not looking for new employees were asked to evaluate eight potential reasons they are not doing so, overall business conditions headed the list as usual, including not needing new employees at this time (with 81% indicating this as a reason), worries that revenues or sales won't justify adding more employees (74%), and worries about the current status of the U.S. economy (66%).

However, 61% of owners pointed to worries about the potential cost of healthcare, 56% to worries about new government regulations, and 55% to worries about cash flow or the ability to make payroll. Thirty-two percent point to it being hard to find qualified employees.

At the bottom of the list, but still at a surprisingly high level, 30% of owners say they are not hiring because they are worried they may no longer be in business in 12 months. This is up from 24% who had the same worry in January 2012.

Small-Business Owners' Worries About Hiring, January 2013

Owners' Hiring Intentions Turned Positive in January

Looking forward, U.S. small businesses now expect to add more net new jobs than they plan to eliminate over the next 12 months, with owners' net hiring intentions at +5 in January. This is up from -4 in November, but still below the +10 of July and the +14 of a year ago.

Trend: Wells Fargo/Gallup Small Business Index: Net Hiring Intentions, Next 12 Months

Net hiring intentions are calculated by subtracting the percentage of owners expecting a decrease in jobs from the percentage expecting an increase. Currently, 12% of owners say they expect the number of jobs or positions at their companies to decrease over the next 12 months, down sharply from the 21% who held such expectations last November. At the same time, 17% expect to increase the number of jobs at their companies, the same as in November but down from 20% in July and still at the lowest level measured since October 2011.

Trend: Wells Fargo/Gallup Small Business Index: Hiring Intentions, Next 12 Months


The lack of improvement in small-business-owner self-reported net hiring over the past 12 months is consistent with January's lack of year-over-year improvement in Gallup's P2P (Payroll to Population) employment rate. Small businesses continue to hire fewer employees than they are letting go, while overall full-time U.S. employment is, at best, keeping up with the growth of the U.S. population. The lack of improvement in small-business hiring is also consistent with the estimated -0.1% annualized growth rate for fourth quarter GDP.

On the other hand, small-business owners' net hiring intentions turned positive in January, consistent with the improvement in the quarterly Wells Fargo/Gallup Small Business Index. While owners suggest little improvement has taken place in the net hiring in the past, their hopes for future hiring have improved compared with where they were immediately after last year's November elections.

Finally, the fact that so many owners say worries about such things as potential healthcare costs and potential new government regulations are holding back hiring is troublesome for the job market outlook. Still, probably the most worrisome response is that 30% of small business owners fear they may not be in business 12 months from now. This a bad sign not only for small-business hiring and capital investment, but also for the overall U.S. economy in 2013.

About the Wells-Fargo Small Business Index

Since August 2003, the Wells Fargo/Gallup Small Business Index has surveyed small-business owners on current and future perceptions of their business financial situations. Visit the Wells Fargo Business Insight Resource Center to access the full survey report and listen to Wells Fargo's quarterly Small Business Index podcast.

Survey Methods

Results for the total dataset are based on telephone interviews with 601 small-business owners, conducted Jan. 7-11, 2013. For results based on the total sample of small-business owners, one can say with 95% confidence that the maximum margin of sampling error is ±4 percentage points.

Sampling is done on a random-digit-dial basis using Dun & Bradstreet sampling of small businesses having $20 million or less of sales or revenues. The data are weighted to be representative of U.S. small businesses within this size range nationwide.

In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.

For more details on Gallup's polling methodology, visit

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