Is this a small business recession?

First-time claims for unemployment insurance benefits headed higher last week—not a good sign for the strength of the economic recovery. Or should I say “recovery”? The Department of Labor numbers, out this morning, mark the fourth increase in the past five weeks and the highest rate of claims in nine months.

Another set of government data which came out yesterday sheds some interesting light on where those losses may be coming from. In a phrase: small businesses.

That’s not typically what you’d expect in a recovery. Small businesses are often given the credit for getting people back to work the fastest. But according to the Bureau of Labor Statistics’s Business Employment Dynamics report for the fourth quarter of 2009, 61.8% of all net job losses came from firms with one to 49 employees. Considering that those firms only employ 29% of workers, that’s pretty remarkable. A headline in today’s WSJ reads “Small Firms Lagging, With Bulk of Job Losses.”

Although it is important to keep in mind that such a conclusion depends on how you define “small.” In this paper, BLS economist Jessica Helfand looks at firms with 1 to 99 employees during the height of the recession and finds a less pronounced effect. She also compares the most recent recession to the past two, and comes to an interesting conclusion. While the 1990-91 recession was characterized by more pain at small firms, and large firms bore the brunt in the 2001 downturn, our most recent episode has ridden roughshod over firms of all sizes.

Which is kind of what it feels like here on the ground.

Facebook, Wall Street Banks Sued Over Pre-IPO Financial Forecasts

Just days after its controversial IPO, Facebook and its Wall Street bankers have been hit by shareholder lawsuits alleging that the social networking giant and its underwriters concealed the company’s decelerating revenue growth from investors. The lawsuits come amid a growing furor about whether Facebook’s banks selectively disclosed information that gave favored clients an unfair advantage over other investors. Top U.S. regulators have begun examining the IPO, and now the U.S. Senate Banking Committee and other lawmakers want answers from Facebook about issues raised in the offering’s aftermath, according to The Hill newspaper.

Small Dairies Go Under as Milk Prices Sink Again

PLAINFIELD, Vt. — The MacLaren brothers are third-generation dairy farmers, but they will likely be the last in their family.

After working all their lives on the hillside farm in Vermont that their grandfather bought in 1939, rising to milk cows at 3 a.m., even in blizzards and sub-zero temperatures, they decided to call it quits, auctioning off their roughly 200 cows and equipment ranging from stalls and hoof trimmers to tractors and steel pails.

http://stephenpoo.wordpress.com stephenpoo

At what point can we safly say the recession is over, and the depression’s begun?
deconstructiva

Thanks, Barbara. Maybe businesses of all sizes that choose to hoard cash (instead of employees, but I digress) should remember: no jobs, no recovery, QED. I presume the top managers are slashing their own salaries to keep employees around, yes? No?
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…btw, Barbara, thanks for last 2 housing posts + interview. I left praise / thoughts at last post but was during the graveyard shift. After noticing what Kate Pickert and swampland teammates ~~suffer to the point of tears from other readers~~ go thru with reader replies, I want to make sure reporters both here and at swampland notice rare compliments instead of the usual complaining we’re known for. Keep up the good work.
deconstructiva

Barbara, for your next post or dead-tree piece on large biz / hiring / NOT, this is a good link to ponder (although loyal readers here and at swampland noticed similar stuff long ago, but this blog gets more page hits than our whiny comments). Hope it helps out –
http://stanleybing.blogs.fortune.cnn.com/2010/08/19/how-wall-street-is-screwing-up-the-recovery/
ps56penn62pr64

Financially supported by the business community, representing business interests in government by supporting lower taxes, fewer regulations and smaller government, Republicans strongly oppose any Democratic initiative to empower workers, provide economic safety nets for all people and holding business accountable for the environmental damage resulting from commercial activity.

With the hiring of new employees being the prerogative of business men who, for the most part, are Republicans, and a depressed economy with high unemployment being bad for Democrats running for national office, why are people confused by the employment numbers?
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valcorusa

As Small Business Restructuring Consultants, we can safely say that what are seeing is nothing short of devastation.

While good for us, still truly sad. It didn’t have to be this way.
jeffinmontana

Think about it – small biz pays a tax that large biz, porportionally, does not pay, the Self Employment Tax. We are at a huge disadvantage paying this tax on all income under 106K.

Think about it – a small biz with 100K of taxable income pays roughly 40% in fed taxes (25% income + 15% self employment). Then, we have to pay State taxes on top of that.

Billionaire Warren Buffet pays 17%. Give us his tax rate and we will get this economy humming…guaranteed!

The way we are over-taxed its amazing any of us survive.