This month, Intuit has updated its Employment Index with new government data and more than doubled its sample set of customer data to better forecast the state of American small businesses. This month’s indexes show that small business employment numbers have been dropping since May, while revenues have been dropping since February.
This morning Intuit announced the October release of Intuit’s Small Business Employment Index, which is the first batch of results from the new analysis model we’ve been working on for almost a year. The Revenue Index is based on a separate model and remains unchanged. We’ll go into the findings of this month’s indexes in a bit, but first, let’s discuss the changes to the Employment Index methodology, which will hopefully help you better understand the results.
Previously, the Employment Index measured small business hiring, employment by geography, average compensation, and average number of hours worked among companies with fewer than 20 employees by aggregating data from roughly 80,000 Intuit Online Payroll users and adjusted those numbers on a monthly basis based on total payroll numbers reported monthly by the Bureau of Labor Statistics (BLS).
Under the new methodology, we are still measuring small business hiring, employment by geography, average compensation, and average number of hours worked among companies with fewer than 20 employees, but we’ve added more inputs to build a model that more closely aligns with national data, and as a result, one that better predicts the state of American small business employment than before.
In the new model, data is pulled from an expanded subset of Intuit customers (now 170,000, more than double the previously aggregated 80,000) and now includes BLS private (non-government) payroll and construction payroll numbers from the Payroll survey, plus self-employment numbers from the Household survey, which were previously not included. As before, we still also use BLS total payroll data. These factors are all strong indicators of small business employment growth, so folding them all into our methodology gives us a much better forecast.
So, why recalibrate now? We now have access to employment counts from state unemployment insurance records from the quarterly Business Economics Division data from BLS, which plays the central role in the new model. The caveat is that by the time BED data is released, it is more than a year old, so small business employment numbers are only available up to December 2011 now. Our team of data experts and former Chief Economist of the U.S. Securities and Exchange Commission and Chief Economist of the U.S. Department of Housing and Urban Development Susan Woodward has built a model using those numbers, that, when combined with employment data from 170,000 Intuit small business payroll customers and their 467,000 employees, can provide an early and near real-time look at what the BED data will say about current employment numbers in the upcoming annual March report.
Of course, there is much more detail to the process, so if you’re interested in learning more, please see the Methodology tab at index.intuit.com.
Now, onto the numbers: this release of the indexes shows that employment has been declining since May and revenues have been dropping since February. The October 0.05 percent decrease in employment continues a mild decline that began in May 2012. From March 2010 to May 2012, small business employment grew by 150,000 jobs, totaling 19.9 million. Since May, small business employment has fallen by 65,000 jobs, bringing the total size of the recovery to 85,000 small business jobs.
“The absence of a strong rise in small business employment during the recovery reflects two forces,” said Woodward. “First, while construction shows some recovery, residential construction activity remains far below where it was in 2006. Second, small business employment has been a declining share of private sector employment for at least 60 years. The decline tends to be abrupt in recessions and slower the rest of the time. The jobs lost are primarily non-manual routine work, such as word processing and checkout services in retail.
Overall September small business revenues fell by 0.3 percent. Since February 2012, small business revenues have declined by 2.5 percent, equating to an annualized decline of 4.3 percent.
Here’s a quick summary of the numbers:
October Employment Index
- Overall employment was 10,000 jobs fewer in October than in September.
- The highest employment growth was seen in Arizona, with a 0.13 percent growth from the previous month. For more state info, click here.
- The largest employment decline was seen in Oregon, with a 0.11 percent decline from the previous month.
- Average monthly compensation in October was $2,791, down 0.1 percent, or $3, from the revised figure of $2,794 in September.
- Average monthly hours worked in October was 107.1 hours, down 0.7 percent, or 42 minutes, from the revised figure of 107.8 hours in September.
September Revenue Index
- Small businesses overall saw revenue decline by 0.3 percent in September.
- The construction sector saw the biggest decline, at 0.8 percent, followed by retail, professional services, and accommodation and food services, each declining by 0.5 percent.
The real estate and health care industries saw the smallest declines, at 0.1 and 0.2 percent respectively, but health care has seen the biggest continual decline, falling 6.5 percent since December 2011.
The Revenue Index is based on data from approximately 100,000 small businesses using QuickBooks Online.
Looking for more info or more revenue-by-industry details? Check out the full downloadable report at index.intuit.com.
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