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Small Business Hiring Slowed In February

Written by Tim Morral
Published: 3/16/2015

Latest ADP report revealed that small businesses added fewer jobs in February than in previous months, but economists aren't concerned.

Small businesses are often regarded as the country's most steady source of employment growth. But payroll processor ADP's most recent employment report indicates that small businesses have slowed down on hiring, adding fewer jobs each month since November 2014.

SMB Hiring Decline Per ADP

According to ADP, small businesses added 94,000 new employees in February. That's a slight decrease from the 97,000 workers that were hired in January. The downtick represents the third month in a row that job creation has slowed in the small business economy. In November 2014, 128,000 small business jobs were added, and in December 2014 monthly job creation fell to 123,000 jobs..

Slower Hiring No Reason to Worry

Experts say the decrease in hiring shouldn't be a concern. This month's hiring totals still represent a year-over-year increase and show a noticeable improvement relative to prior years, as the U.S. continues its post-recession recovery. Another factor to take into consideration regarding the hiring slump is the cold weather, which was pretty severe in February.

"I suspect some of the recent softness is weather-related," said Mark Zandi, a chief economist for Moody Analytics, in a call with the media regarding the ADP report. Despite the decrease in hiring during the month of February, Zandi believes that "the labor market is in very good shape."

It's not unusual for small business hiring numbers to decline in February. The drop in hiring from the last two months of 2014 may reflect the fact that small business retailers typically add workers in Q4 to handle the holiday rush.

Small Business Confidence Remains High

There's also no indication that small business owners are pessimistic about the future. We previously report that despite the harsh weather, small business owners remained confident about business growth. And according to Zandi, there's latent hiring demand that bodes well for future small business hiring. He noted that although small businesses haven't hired as many people in the past few months, the number of job openings has continued to rise in recent months, reaching a record 5 million open positions in December 2014. This will likely translate into more hiring down the line.

Other research supports the idea that the small business economy will improve in the months to come. In a recent Wells Fargo and Gallup poll, small business employers expressed record high confidence, largely due to a sharp increase in sales and improvements overall financial health. In fact, nearly 25 percent of small business employers surveyed in the poll said that they plan to add more workers in the year ahead, compared to a mere 7 percent who believe they will reduce their workforces in 2015.

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