Small businesses are the engine that drives the economy, but not everyone is hiring.
Small business surveys these days tend to paint a glowing picture of the economy, particularly around hiring.
A case in point is the latest survey by PNC Bank, out Thursday that suggests one quarter of small business owners will hire in the next six months. The bank polled 1,800 entrepreneurs this summer on their outlook for the economy for the remainder of the year and beyond.
Close to 90 percent said they’re optimistic about their companies’ prospects into the first quarter of 2016. Seventy-percent said they will make a profit, and only six percent said they will have a loss. All of this is despite the fact that the economy, while growing, is expanding at a tepid rate of around 2.5 percent. (The latest job report from the Department of Labor, out Friday, also shows a sharp slowdown in hiring in September, with gains in previous months revised lower.)
But the surveys fail to take into account a not-so-subtle shift that’s taking place around hiring since the last recession. As Uber and Task Rabbit and Instacart bear witness, companies don’t need to have full-time employees any more. They can rely on a seemingly endless supply of contract workers, of which there are about 3 millionin the U.S.
I was reminded of this shift in demand for workers last night, at a dinner hosted by small business accounting software company Xero. In attendance were two New York-based business owners who represent that change.
The first, was Ean Murphy, the owner of Moxie Bookkeeping and the second was Jacob Wood, founder of Woodies, an online retailer that specializes in manufacturing made-to-order shirts for men.
Murphy’s business, which provides accounting services for creative businesses, such as architecture and film production companies, has been around for 11 years. Woodies is a startup, bootstrapped by the owner, which has been doing business for the past two years.
Murphy relies on 12 bookkeepers to provide her service. Seven are on-staff with full benefits, two are part time, and three provide services on a contract basis. Murphy prefers to have her bookkeepers on staff, because it deepens her relationship with her workers and clients, she says. She’s hoping to hire one of her contractors and bring her on as an employee this year.
About Uber, and other companies that rely exclusively on contractors, she says, “I find it troubling.” She adds that she feels a responsibility to her workers that includes helping them fund their retirements and making sure they get a decent wage.
Wood, on the other hand, runs a global enterprise entirely based on contract workers. The company relies on five Web designers and developers in Eastern Europe, a manufacturing facility in Thailand that creates each order, and the logistics company that ships the shirts. The development contractors get close to $70 an hour.
While Wood says he’d like to hire someone full-time to handle sales, and perhaps bring a development team in-house, there’s no rush, and it’s not necessary currently. Sales are definitely good, and have grown into the hundreds of thousand of dollars, Wood says, but he wants to be careful and stay flexible.
“I would rather have a more solid business and more money,” Wood says.
And that probably sums things up for a lot of business owners. Despite the rosy forecasts about the economy and hiring, there will be more potential employees than jobs as growth is stuck at its curent low rate. And like Wood, most business owners today won’t hire, unless there’s an absolute need.