Report: Business Optimism Rebounds in May

SurePayroll's monthly report card of 25,000 businesses shows a slight increase in hiring, though salaries continue to fall. The company's survey of 267 businesses, however, suggests economic optimism is on the rebound.

Sure Payroll released its monthly Small Business Scorecard, which showed a rise in small business optimism during the month of May. Based on the company's latest survey of small business owners, 73 percent of respondents indicated they are optimistic about the small business economy, up from 66 percent in April.
Michael Alter, president of the Glenview, Ill.-based company, said the optimism appears to be fueled by the fact that many small and midsize business owners have managed to maintain or grow revenues and profits, even in a down economy. The May survey was completed on May 29. It consisted of 267 respondents randomly selected from 25,000 small businesses the company uses to calculate their economic indicators. "The overall message is clear," Alter said. "This down economy has adversely impacted many small businesses, but the vast majority of small business owners have figured out ways to hang on or even take advantage of events to continue to grow their companies."
In addition, the company's Hiring Index, an economic index derived from actual payroll records for 25,000 SMBs, rose 26 points to 11,430 in May, up from 11,404 at the end of April. The uptick was 0.2 percent from the prior month, suggesting that on average small businesses were hiring last month. Year-to-date, the Hiring Index is up 1.4 percent, which Alter said puts small business hiring on track to increase 3.3 percent for calendar year 2009. "The results are fairly surprising, given the state of the economy," he said. "Small businesses often lead economic recovery, so it is good to see that small businesses are continuing to add new employees."
However, Alter points out one of the reasons that small businesses have been able to add new employees is that the price of a new employee has never been lower. Based on the SurePayroll Pay Index, year-to-date salaries are down 3.6 percent. The average small business annual paycheck in the United States is now $30,482. In May 2008, it was $32,528; a drop of 0.9 percent and a trend that has occurred for the past four months. Alter said the driving lever in declining salaries is in new hires. "In other words, if you were unfortunate and lost your job, you may have to be willing to accept approximately 6 percent lower salary when you return to work," he explained. "Business owners can pay less because the supply of qualified available workers is so high."
The trend of expanded employment of independent contractors also continued in May, with the company's Contractor Index now standing at 4 percent, up from 3.94 percent at the end of April. This means that for every 100 workers engaged by small businesses in May, four are 1099 independent contractors and 96 are W-2 employees. Alter said the index points to two main factors driving the growing use of independent contractors. First, there are more independent contractors looking for work, and unemployed individuals are making ends meet by freelancing or taking on contract work.
"Second, small business owners view the use of contractors as more cost efficient and lower risk-it's much easier to terminate a contractor than it is to terminate an employee," he said. "As the economy recovers, we expect this transition to slow down, but it's also our estimate that even with a full economic recovery, we will still see heavier use of contractors than in years past."