Small businesses are adding low-wage jobs

@CNNMoney March 7, 2012: 10:30 AM ET

NEW YORK (CNNMoney) -- The nation's smallest businesses continued to add jobs in February, but they were mostly for low-wage work, according to a report released Monday.

Small employers created 45,000 new jobs in February, according to payroll processing firm Intuit (INTU), which analyzes monthly employment data from 70,000 businesses with less than 20 workers.

That was down from 55,000 new jobs a month ago, and 60,000 workers last February, according to the report.

Small businesses with under 20 workers have slowly been adding jobs since 2009, according to Intuit's payroll data. "But these new jobs are primarily at the low-end," said Susan Woodward, an economist with Sand Hill Econometrics who consults for Intuit. "They are hourly, low-wage jobs."

These hiring trends are consistent with what's happening with the broader economy, Woodward said.

"What we're hearing is that the economy is getting better, but slowly," she said.

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Woodward attributed last month's tepid increase in hiring to persistent softness in the housing and real estate industries.

"Real estate construction hasn't fully recovered and the unemployment rate in construction is still high," she said.

Because small businesses account for a large percentage of firms in the housing industry, robust hiring won't happen until housing fully recovers, said Woodward.

Small businesses are vital to the job market as they comprise 87% of the total U.S. private employer base and employ nearly 20 million people, according to the government.

Intuit's latest snapshot of small business hiring comes ahead of two other closely watched jobs reports expected this week.

On Wednesday, payroll processing firm ADP (ADP, Fortune 500) released its monthly report on private sector hiring in February that showed private firms added 108,000 new jobs in the month.

On Friday, the Labor Department releases its big monthly employment report for February.

Employers are expected to have added 207,000 jobs last month and the unemployment rate to hold at 8.3%, according to economists surveyed by Briefing.com.

February's anticipated gains follow a surprisingly rosy January jobs report that showed private sector jobs fueled the prior month's jobs increase.

Intuit's February report also suggests a brighter picture for the small business job market going forward, since employers are keeping workers longer and paying them slightly more on average.

Average monthly compensation rose by about $4 per worker to $2,686 in February, according to Intuit. Turnover last month was 5% at these firms, "which is about half of what it was when the recession began," said Woodward.

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Regionally, Arizona and Washington State are leading the way in small business job growth, according to the report.

"Interestingly, the biggest gains were seen in the states that have suffered most from the recession, the majority of the western states, plus Florida," said Woodward. In Arizona, a rise in consumer spending seems to be fueling hiring.

"Consumers are spending more here and business projects have also picked up," said Donna Davis, CEO of the Arizona Small Business Association, a trade group that represents 11,000 small business in the state.

"Real estate is also a huge sector in Arizona. The worst of the foreclosure crisis is behind us and we're seeing new construction happen," she said.

The trickle-down effect of all these activities is benefiting small businesses, and lifting hiring, she said.

Meanwhile East Coast states such as New York and Maryland are lagging, according to the report.

"New York is where there are more financial services businesses," Woodward said. Businesses in the state are paying close attention to uncertainty surrounding the euro and the European debt crisis, and many are postponing hiring, she said. To top of page

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