Small Business Employment Rises, but Revenue Falls: Intuit

The revenue decline that began in early 2012 coincides with a rise in self employment as more companies are competing for business in the same markets.

Small business employment in the United States increased 0.11 percent in January, representative of 20,000 new jobs added and an annualized growth rate of 1.3 percent, while overall revenue dropped 0.4 percent in December, according to the monthly Small Business Employment and Revenue Indexes compiled by small and midsize business (SMB) financial management solutions specialist Intuit.

The rate of small business employment continued its slow climb after a slight dip from April through September 2012, though the number of small business jobs--more than 19.9 million—is still below the peak in April 2012, and well below its pre-recession level of 21.2 million jobs in March 2007. Average monthly compensation fell by 0.2 percent in January, or $6, compared to the increase of $13 seen in December, while average monthly hours worked decreased by 0.9 percent, or almost one hour.

“Given the continuing high levels of unemployment, we can expect little-to-no impact on small business wages and employment levels from the return of the employee payroll tax to its previous level of 6.2 percent,” Susan Woodward, the economist who worked with Intuit to create the indexes, said in a statement. “Instead, we will be much more likely to see a decline in the consumption expenditures of employees, who will be taking home less money."

The report found small business hourly employees worked an average of 105.1 hours in January, down slightly from the revised figure of 106.1 hours in December, making for a 24.3-hour workweek, while the average monthly pay for small business employees dropped to $2,676 in January.

For the entire year, the construction industry was the only one with increased revenue, reporting a 3.1 percent rise, compared to a decline of 1.8 percent for small businesses overall. The retail and health-care sectors reported the biggest decreases over the past year with a 5 percent and 3.8 percent decline, respectively.

"The revenue decline that began in early 2012 coincides with a rise in self employment," Woodward said. "This increase of new entrants into existing industries may explain the decline in revenue per business. There are now more businesses competing for business in the same markets."

Among the 33 states tracked by Intuit's Small Business Employment Index, 11 showed employment increases, two remained flat and 20 showed decreases. Utah and Nevada saw the largest increases, while Michigan and Indiana saw the greatest declines.

The index is based on data from Intuit Online Payroll and QuickBooks Online Payroll, covering the period from Dec. 24 through Jan. 23. The Employment Index is based on aggregated data from 170,000 small business employers, a subset of users that use Intuit Online Payroll and QuickBooks Online Payroll. The Revenue Index is based on aggregated data from approximately 100,000 small businesses, a subset of users that use Intuit's QuickBooks Online financial management offering.