Small Business Revenue Declines for the Sixth Consecutive Month: What's (Potentially) Good About That?

by Tammy Lam on October 1, 2012
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This morning Intuit released the latest edition of the Intuit Small Business Indexes, which again revealed mixed results.  Compensation and hours worked for small business employees is still on the rise, but small business revenue has declined for the sixth consecutive month. And while small business employment is still growing, it is at a rate so slow that it’s “almost flat,” according to Susan Woodward, the economist who worked with Intuit to create the indexes.

According to Woodward, the picture isn’t looking rosy for big business either, though employment is growing slightly there as well. Last month, private big business employment was up by about 100,000 jobs, but on a base of about 111 million, that’s an increase of less than one-tenth of one percent — not enough to get us back to full employment anytime soon.

The good news is that more people are going into business for themselves. After five years of declining self-employment beginning in January 2007, we began seeing a big comeback starting in November 2011. Nearly 600,000 additional self-employed folks have been added since then, and there are now 14.2 million people who are self-employed. One theory is that the decline in revenue per business may reflect the entry of these new businesses into the economy. Let’s hope that’s the case!

While the employment rate is still slowly growing, the hiring rate (not the same as the employment rate) is still flat, which indicates the reluctance of workers to leave their jobs.  Small business sectors usually have a higher turnover than other sectors, driven mainly by employees leaving their jobs for other jobs. But throughout the tepid recovery, turnover has remained low as workers have become reluctant to risk job security.

This edition of the indexes reports on September employment, compensation, and hours worked, along with the August revenue figures of U.S. small businesses.

Here’s a quick summary of the numbers:

Employment Index

  • 40,000 new jobs were created in September.
  • The highest employment growth was again seen in Michigan, at a rate of 0.8 percent growth from the previous month.
  • Average monthly compensation in September increased by 0.6 percent, or $17, compared to the $2 increase seen in August.
  • Average monthly hours worked in September was 107.2 hours, up 0.18 percent, or 12 minutes, from the revised figure of 107 hours in August.

The employment index is based on data from approximately 84,000 small businesses using Intuit Online Payroll.

Revenue Index

  • Small businesses overall saw revenue decline by 0.4 percent in August.
  • The accommodation and food services sector, along with the retail industry, again saw the largest declines, contracting by 0.7 percent.
  • The health care and social assistance sector continued to see the smallest decline, at 0.3 percent, which is slightly less than the 0.4 percent decline seen in the previous month.

The revenue index is based on data from approximately 100,000 small businesses using QuickBooks Online.

Want more information about the indexes and methodology? Check out index.intuit.com to see detailed breakdowns of growth (by industry and geography) and to download the full report.

Tammy Lam is a business writer for Intuit and is passionate about solving small business problems.

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