I am blogging this morning from my father’s house in southern Florida where the recession seems to have hit particularly hard.
The NFIB has released an early summary of the job creation portion of their monthly survey summary due out this week, and it is also not very promising for the short-term employment outlook.
Seasonally adjusted, there was a decline in average employment per firm of 0.74 workers reported by small business owners in January, the second largest monthly decline in survey history (December was the largest at -0.86 workers per firm). Eight percent of the owners increased employment by an average of 3.3 workers per firm, but 23 percent reduced employment at average of 4.1 workers per firm (seasonally adjusted). The private sector is very weak, with the only job growth coming from education, healthcare and government.
Over the next three months, 9 percent of small business owners plan to create new jobs (up 1 point), and 14 percent plan workforce reductions (down 5 points), yielding a seasonally adjusted net negative 6 percent of owners planning to create new jobs, the third lowest reading in survey history and unchanged from December. Lower readings occurred only in the 1974-5 and the 1980-82 recession periods. Not seasonally adjusted, job creation plans were positive in all the service sectors, but negative in manufacturing and construction, retail and wholesale. Of the nine census regions, only in the Mountain states did more owners plan to increase employment than planned to reduce employment.
With reports of sales and profit declines more frequent than at any time in the past 35 years, firms have little choice but to reduce costs to survive, and for small firms, the major cost is labor (about 80 percent). Consumer spending didn’t revive, so employment adjustments must now be larger, since hoped-for gains in sales did not materialize. Firms are now cutting hours faster than sales are falling, a rare event. This will raise productivity (sales per hour) and mitigate the rise in unit labor costs.
There is a bit of a silver lining in their findings this month. It looks like firms are making adjustments quickly now, which the NFIB believes should bring the economy to a bottom sooner rather than later. The service sector seems to be finding its legs.
I read your blog, very interesting. I read a very interesting paper recently by Johansson, Dan. “Economics Without Entrepreneurship or Institutions: A Vocabulary Analysis of Graduate Textbooks” (December 2004). He states ” We learn something that cannot be learned from a system of equations. Is it possible to analyze total employment and economic growth, the aggregated outcomes of the actions of individual
persons and firms, without a theory of entrepreneurship? In what way does omitting the entrepreneurial function from the analysis influence our understanding of enterprise, economic development and economic growth? Schumpeter (1942: 86) famously compared leaving the entrepreneur out of economic theory to leaving the Prince of Denmark out of Hamlet”.
He continues to state that “Speaking of industry in Sweden, Erik Dahmén says that the problem is not the industry we do have, but the industry we do not have. Similarly, the problem with economics education is not the training we do have, but the training we do not have. My conclusion, therefore, is that there is a need for economics Ph.D. training based on theories that incorporate entrepreneurship and institutions “.
I have had a place on a Doctorate in Business Admin program since 2007 to study entrepreneurship, and till date i cannot find funding, i wish i my own small way i could conduct practical research that will make a difference in economics and job creation through entrepreneurship. If you know any ideas for funding sources, please share with me.