Small Businesses as Economic Engines

This article reinforces what most of us have thought for a long time: smaller firms are creating the jobs in America, but remain under-estimated as economic growth engines because the big guys get all the attention. Read on.

The most recent revision of estimated growth for the economy in the first quarter of 2005 pegs real growth at 3.8 percent, up from the 3.1 percent original guess. That's pretty good,

Small-business owners have seen the outlook correctly as reflected in the NFIB Small-Business Optimism Index. The index readings in recent months have exceeded 100, which means owners sense the current economy to be as good as or better than that in 1986 when GDP grew 3.5 percent for the year.

In the most recent NFIB monthly survey, 15 percent of those surveyed reported increasing their total number of employees, while 11 percent reported reducing their workforce. This is good news for economic development, since large corporations continue dumping work and jobs overseas. On balance, all small firms added a net of 0.2 employees per firm, a historically strong figure. Job creation has been solid, matching the growth of the economy. Neither has been spectacular, and that is good, since “spectacular” is always followed by “less than spectacular.” The economy can’t over-perform indefinitely, and steady is the best course.