While small businesses remain eager to expand their workforce, economists say many job seekers are likely chasing higher salaries at larger companies with deep pockets.
Employers with fewer than 1,000 employees accounted for the majority of employment opportunities The February federal recruitment and turnover survey was released Tuesday. However, filling these positions is another matter.
private employer 184,000 workers added in Marchpayrolls exceeded expectations, up from 155,000 in February, payroll processor ADP said on Wednesday. However, it also found that small businesses with between 20 and 49 employees cut 11,000 positions last month, but only some employers did so. Even the smallest employers, those with 19 or fewer employees, added 27,000 positions.
“The challenge, especially for small businesses, is that the labor market remains competitive,” ADP chief economist Nella Richardson said on a conference call Wednesday. Although 2024 has begun with a wave of large-scale layoffs and many job seekers are taking longer to find work, demand for workers remains strong.
It’s easy to hire, but it’s not easy to hire.
For many employers, “it is Easier hire, but not easy It’s about hiring,” Richardson said.
The ability to offer a competitive salary may be a factor. ADP found that wages are rising faster than inflation for many workers across the economy. Those who changed jobs between February and March saw their salaries rise by an average of 10% compared to the same period last year, while those who stayed on saw their salaries rise by 5.1%. According to the government’s latest inflation data, consumer prices rose 3.2% in February.
Richardson speculated that the drop in hiring at some small businesses may reflect job seekers chasing the dollar. ADP data shows companies with between 20 and 499 employees made the biggest wage hikes last month, with many small and medium-sized businesses trying to secure jobs in a tight market and possibly increasing wages from larger rivals. This suggests that Japan may be trying to narrow the gap between Japan and China.
“Workers may have moved to larger companies where they could potentially earn more,” she says. Another possibility is that many small businesses “simply didn’t want to hire.”
But many are still doing it, and have been doing so for some time, even as the competition for talent has subsided from the frenzied levels of the early recovery from the pandemic. Tuan Nguyen, a U.S. economist at financial services firm RSM, said small and medium-sized businesses played a big role in job growth over the past three years. However, many companies are “constrained by limited resources” and still “face long-term challenges recruiting qualified candidates,” he said.
They are competing for talent amid a post-pandemic startup boom, which is helping to drive widespread labor demand and contributing to talent shortages that still persist in some sectors. There is. Nguyen said new business formations will average nearly 500,000 per month in 2023, up from an average of 300,000 per month just four years ago.
The high interest rate environment is “further exacerbating the challenges for small businesses,” it added, adding that small businesses often face higher borrowing costs than larger businesses.
Federal Reserve Chairman Jerome Powell repeated on Wednesday The central bank is likely to remain on track to cut interest rates “at some point this year,” an expectation widely shared by Wall Street investors. But Powell, as he has in recent months, stressed the need to see more evidence that inflation is trending down toward the Fed’s 2% target.
Uncertainty over the timing of the rate cut will cast a long shadow over the Labor Department’s Bureau of Statistics’ March employment report, which will be released Friday morning. If the labor market remains too hot for the Fed’s liking, the Fed could hold off on cutting interest rates due to concerns that rapid wage increases will support inflation.
However, most experts expect job growth to continue to slow throughout the year due to steady economic growth. Economists surveyed by Dow Jones expect U.S. employers to add about 200,000 roles last month, down from February’s increase of 275,000.
“Labor demand remains above pre-pandemic levels, which gives us reason to expect a healthy labor market in the first half of this year,” Nguyen said.
