Just What Small Biz Needs an Even Tighter Job Market
Despite all the talk about layoffs, the jobless rate keeps falling
The odds are, 1999 will keep entrepreneurs under the gun in one key
area -- hiring. The regenerating U.S. economy sopped up 378,000
more workers in December, surpassing expectations and bringing the unemployment
rate down one-tenth of a percentage point, to 4.3% for the month. The full-year 1998
jobless rate was 4.5%, down from 4.9% in 1997, reveals the Labor Dept. in its closely watched nonfarm payrolls report.
Who's hiring? Small business is a big factor, says Irwin Kellner, an economics professor at Hofstra
University in Hempstead, N.Y., and a former chief economist at Chemical Bank. "As quickly as big companies
are thinning staffs, small businesses are picking them up," he says.
Difficulty finding good help is a persistent complaint in recent surveys of entrepreneurs: The latest National Federation
of Independent Business report found 30% of small businesses polled
have hard-to-fill job openings, amid the U.S.'s longest peacetime economic
expansion. Of the 557 small-business owners the NFIB surveyed in late December,
a net 20% plan to add workers in the first half of 1999, up from a net 17% in November. (The net figure
subtracts those who plan to cut staff from those who are adding.) "Our guys are hiring like fiends,"
says William Dunkelberg, the NFIB's chief economist.
The Labor Dept. figures contain some distortions, says economist
Selig Sechzer, senior vice-president for Alliance Capital Management. But
he says the bottom line in the jobs growth data is "the U.S. economy is very dynamic
and is in the process of reinventing itself."
DEVASTATION? John Challenger, chief executive of Challenger, Gray & Christmas
Inc., an outplacement firm in Chicago, says a relatively high number
of layoffs announced in December were outweighed by jobs created by small
companies. He added that the retrenchment headlines give the impression that a flood
of people will hit the market, but they're usually let go over a year
His comments downplay a recent Challenger, Gray study dramatizing
1998 layoff figures as "the most devastating job-cut year of the decade,"
reflecting, among other things, high merger-and-acquisition activity.
Even high layoffs aren't likely to send as many castoffs to small companies as they'd
like, Challenger suggests. Why? When they lay off, large companies redirect resources into other areas
and sop up suitable workers. "We're into a just-in-time marketplace," explains Challenger. "Companies show no hesitation to let people go in areas where they're losing market share. But they're
much more nimble. They move resources into areas where they're making money."
On the bright side -- from an employer's point of view, anyway -- a 3.8%
rise year-on-year in December in adjusted hourly wages shows labor is still
pretty meek about demanding higher pay, considering how much small companies
want them. That's because "our labor force is competing with foreign
workers," says Alliance Capital's Sechzer. "They understand the process whereby their jobs can be exported.
Global competition is disciplining workers and management."
Another brake on runaway wages is Federal Reserve Chairman Alan Greenspan, known for keeping a close eye on employment costs. "This
rate of job growth would become inflationary over time and would have to
be addressed by the Fed," says Sechzer. "A month or two ago, the prospects
looked good for continued rate reductions. The impact of last month's data
flow is to delay any easing." The upshot: Keep your hiring plans on
hold, and borrow what you can.
By Julia Lichtblau in New York
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