October 2008 SurePayroll Small Business Scorecard

(Submitted to BarterNews by Michael Alter, President, SurePayroll)

Small businesses are the Rocky Balboa of the economic world. Beat them to a pulp and they keep on fighting. Despite all the economic problems in October, U.S. small businesses still managed to grow in size by 0.28%. The SurePayroll Hiring Index ended the month at 11,219 ? 31 points higher than where the index stood in September. Year to date, small business hiring is up 3.0% nationwide.

However, growth in the last two months is down relative to the prior two months of July and August. It appears that the end may be near for small business growth, and we predict a downturn in hiring for November and December.

As the economic problems roll downhill, growing in size as they make their way down to Main Street, it would truly be remarkable if small businesses could still manage to grow on average.

To be sure, there are winners in a down economy ? businesses that do better in tough times ? but on aggregate we expect net losses in hiring next month and into December. Our projection at this point is that small business hiring growth for 2008 will end up around 2.9%.

Free Fall For Salaries Continues

Business owners have been able to add new employees without grimacing too much because salaries are lower. In fact, salaries declined by 0.39% in October. That was not as bad (from the employees? perspective anyway) as the previous month?s 0.51% decline. As such, our data indicates that salary declines may be slowing down.

Still, we are projecting lower salaries through the end of the year. Year to date, salaries have dropped 2.2% on a national level. We are expecting the 2008 salary decline to end the year having dropped 2.5%. As of the end of October, the average small business salary now stands at $31,893. The SurePayroll Hiring Index is at 1,038, dropping 4 points.

Use Of Contractors On The Rise

For folks who are out of work, becoming an independent contractor may be the answer. In uncertain times, employers hedge their bets by bringing on contractors instead of hiring full-time employees. By doing so, they can save on payroll taxes and on benefits.

Use of contractors was up 0.6% last month. That?s the ninth straight month that we?ve seen an increase in the use of independent contractors. The SurePayroll Contractor Index ended October at 3.67%, up from 3.64% in September.

When we say the Contract Index is 3.67%, that means that for every 100 workers engaged by small businesses in October, 3.67 are 1099 independent contractors and 96.33 are W2 employees. In rough terms, this suggests that 1 out of every 27 workers in the United States is working as an independent contractor, responsible for their own benefits and burdened with costly self-employment taxes.

Regional And State Performance

On a regional basis, the Midwest, Northeast, and South experienced hiring growth in October, whereas the West experienced a contraction in hiring. The West had recorded 18 straight months of hiring growth through the end of February 2008, but has shown weakness of late. We?ve had five down months for hiring in the West in the most recent seven months.

Monthly hiring gains for these regions were 0.7%, 0.9%, 0.3% and -0.1% respectively. As it did in September, the Northeast led the country in small business growth in October. With all of the woes on Wall Street, we would expect that trend to end soon.

In October, average salaries declined in all regions, except the West. Salary changes for the Midwest, Northeast, South and West were 0.2%, -0.8%, -0.8% and 0.4% respectively. You can get paid more in the West, but it may be tougher to find a job there.

On a year-to-date basis, hiring changes for the Midwest, Northeast, South and West now stand at 6.2%, 7.9%, 5.7% and -0.3% respectively. The West is the only region where hiring is down year to date. Year to date salary changes for the Midwest, Northeast, South and West are -1.6%, -6.1%. -7.9%. 4.8% respectively.

One can argue that the Midwest is doing the best this year in surviving the down economy because they have had respectable hiring growth with acceptable salary declines relative to other regions.

As depicted in the graphic below, year-to-date results vary from state to state. The Scorecard comprises data from all fifty states but we pay close attention to states that we have earmarked as ?benchmark states? which include Arizona, California, Colorado, Florida, Illinois, Maryland, Michigan, Minnesota, Nevada, New Jersey, New York, Oregon, Pennsylvania, Texas, Utah and Washington.

For more information go to www.surepayroll.com.