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Small-Business Employment Continues To Plummet

The small- and midsize-businesses sectors each reported employment losses that are more than double the amount for large enterprises, according to a report released Wednesday. "As gruesome as the numbers are, they certainly aren't unexpected," said Joel Prakken, chairman of Macroeconomic Advisers.
The small- and midsize-businesses sectors each reported employment losses that are more than double the amount for large enterprises, according to a report released Wednesday. "As gruesome as the numbers are, they certainly aren't unexpected," said Joel Prakken, chairman of Macroeconomic Advisers.Private employment decreased by 697,000* in February, according to the ADP National Employment Report (.pdf) released today. The breakdown is 262,000 job losses among business with less than 50 employees, 314,000 at companies with 50 to 499 workers, and 121,000 at enterprises that have 500 or more people.

The numbers are a sharp contrast to just a few months ago, when the ADP monthly report found that employment in large businesses declined by 41,000 from September to October. The drop was even steeper in midsize companies -- 91,000 jobs vanished. And small companies were hardly untouched with a decline of 25,000. According to ADP, September marked the first outright decline in small-business employment since November 2002.

"Small businesses typically lose jobs proportionally at a slower pace than big companies," Prakken told me. "The fact that they're showing such sizable losses now tells you how serious this economic situation really is."

More specific findings include:

  • The goods-producing sector saw a decline of 338,000 employees in February -- the 26th consecutive monthly decline. Prakken attributes part of that number to the less-than-stunning numbers reported during the holiday season.
  • Employment in the manufacturing sector declined 219,000 last month, marking three years of consecutive monthly declines. Prakken noted that although a lot of manufacturing jobs were lost because of troubles in the auto industry, "now it's spread way beyond that.
  • In February, construction employment dropped 114,000 -- the 25th consecutive monthly decline. It also marks a loss of more than 1 million construction jobs since the peak in January 2007. "We initially started highlighting the construction number because it was at the epicenter of the subprime meltdown," Prakken said.

"I hate to say that I don't think we're near the bottom," he continued. "But it won't be until later in the year that we'll see when we might hit bottom.

"We're going to lose another 2 million jobs through the end of the year," Prakken predicted.

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*CORRECTION: Updated to reflect actual number of total unemployment in February.

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