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Lack of small-business hiring is affecting economic recovery

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Small businesses are not playing the significant role they typically play in economic recovery, according to the Washington Business Journal.

The lack of job creation is being attributed to various factors. For example, the National Federation of Independent Business' monthly index of small-business indicators fell one-tenth of a point in June, demonstrating that small-business owners still are pessimistic about the economy. Only 4 percent of small-business owners surveyed said now is a good time to expand.

Additionally, a Chamber of Commerce survey reports that only 19 percent of small-business owners plan to hire employees during the next year. Those who don't plan to hire cited reasons such as economic uncertainty, poor sales and political uncertainty.

Also, the Kauffman Foundation, a foundation devoted to entrepreneurship, reports that startups are hiring fewer workers than they have in the past. This is significant because most of the economy's net job gains have been attributed to startups, which used to create an average of about 3 million jobs per year. However, in 2009, that number fell to 2.3 million and remains depressed. New businesses are opening with fewer employees and are adding jobs at a slower pace.

Business groups and elected officials have suggested various steps the federal government could take to encourage more small-business growth, including funding long-stalled transportation projects and extending this year's payroll tax cut for workers and expanding it to employers.

"We need to find a way to start more employer businesses, ensure they are larger and nurture their growth," says Robert Litan, the Kauffman Foundation's vice president of research and policy.


8/16/2011

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