Customers, Not Stimulus, Spur SMB Hiring

Despite efforts in Washington to incent job creation among smaller businesses, customer demand remains the leading driver for hiring.Late yesterday, the Senate voted to push a $15 billion jobs bill toward a vote. The bill includes incentives for hiring and retaining new employees. The question, of course, is what this bill will actually do for job creation if it does pass. According to the Congressional Budget Office, the $15 billion could create as many the equivalent of 270,000 jobs in a year's time. That sounds great until one considers that in the past 2 years 7 million jobs have vanished from the U.S. economy. A return to 5% unemployment requires more than 200,000 net new jobs monthly. . . for the next 7 years. So 270,000 new jobs in a year won't make a dent.

Moreover, according to the findings of the American Express OPEN Economic Pulse survey of small business owners, hiring incentives may not even drive job creation for smaller companies. Conducted from January 28 - February 1, the results of this survey [PDF] of small business owners indicate that 51% of business owners will take advantage of a tax credit for hiring of the Senate bill passes into law. However, only 11% indicate that tax credits factor into a decision to hire. A tangent worth considering here is why 49% won't take the tax credit. Though tax credits won't prompt a hiring spree, more business will - go figure. The runaway winner in terms of spurring job creation for SMBs is customer demand; 42% ranked it as the leading determiner in hiring.

Based on this survey data, expectations for the Senate bill to spur substantial job creation should be tepid at best. According to the SBA, small businesses employ just more than half of U.S. workers [PDF]. So while the estimated 29 million plus small businesses may not have a big individual footprint in the labor market, collectively, the impact is significant. And the clear message here is that incentives or no, what SMBs really need is customers to start spending again.

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