We’re closing in on two years since the beginning of the worst recession in a generation. Since some experts are saying that the economy is growing again, now might be a good time to look back and see how the recession has affected employment.
Although job loss has been heavy in both large and small establishments, it has clearly been worse in big ones. In November 2009, non-farm private payrolls at small establishments were at 94.7 percent of their December 2007 levels as compared to only 92.7 percent in large establishments.
But small establishments haven’t just lost fewer jobs during the recent economic downturn they also gained more jobs during the previous economic expansion. The ADP data indicate that from November 2003 through December 2007, employment in small establishments grew 9 percent, while in large establishments, it increased by only 5 percent.
Small establishments may be more resilient to economic shifts than large ones. When economic conditions worsen, they may be better able to cut costs and respond without laying people off. In contrast, when economic conditions get better, they may be able to add new employees at a faster pace.
But before you draw any firm conclusions about the relative advantages and disadvantages of large and small firms as job creators, let me add an important caution. As I have explained elsewhere, small establishments are not the same thing as small businesses. And small establishments’ greater job creation may come from small establishments that are part of large businesses, rather than from small independent companies.
* * * * *