Will 2015 be the year that small biz rebounds?
This year, small businesses had a much more difficult recession than the rest of the economy. The overall level of payroll employment (including government) fell 6.3 percent from the peak before the recession to the trough, while payrolls for small business (1 to 19 employees) fell by 7.0 percent. Total payroll employment has surpassed the previous peak, but small business is still 650,000 jobs, or 3.2 percent, short of the previous peak.
Hard times relating to housing and construction was a major reason for the recession. Prior to the recession, it was typical for 6 to 8 percent of GDP to come from construction. Because most construction firms are small, about 20 percent of small-business activity is construction. Any decline in construction hits small business even harder than it hits the overall economy. But things are improving.
The near-term prospects for small business look good. In November, small business saw gains similar to those of the overall economy. Employment was up, hourly employees worked more hours, and we saw a sharp rise in the hourly wage for hourly employees. Small business will benefit from lower oil prices and from the continuing, but not dramatic, recovery of construction.
In November, Illinois saw employment gains in small business but was slightly below average across states, despite being adjacent to Michigan and Ohio, two states (among only six) with a decline in small-business employment in November. Hours worked for hourly workers rose in Illinois, as did total compensation for small-business employees.
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