Can Small Biz Rescue Job Market?

With U.S. unemployment hovering in the 6 percent range, small business growth could prove to be the hero to the beleaguered job market. In-Stat/MDR estimates there will be approximately 2.4 million small businesses with fewer then 500 employees in operation by the end of 2003 – up from 2.3 million in 2002 – providing jobs to nearly 38 million workers this year

By 2007, the number of firms is expected to rise to 2.7 million – with employment projected at roughly 41 million – accounting for nearly one-third of total U.S. employment.

Despite research from the U.S. Small Business Administration’s (SBA) Office of Advocacy revealing that there were a greater number of firms that closed up shop than opened in 2002, small firms continue to represent more than 99 percent of all employers, paying 44.5 percent of the total U.S. private payroll.

Small Business Landscape
New Firms Firm Closures Bankruptcies
1990 584,892 531,892 63,912
1995 594,369 497,246 50,516
2000 574,300 542,831 35,472
2001 545,400* 568,300* 39,719
2002 550,100* 584,500* 38,155
* Estimate using percentage changes in similar data provided
by the U.S. Dept. of Labor, Employment and Training Administration
Source: U.S. Bureau of the Census; Administrative Office of the U.S. Courts; U.S. Dept. of Labor,
Employment and Training Administration

In-Stat/MDR expects the greatest share of small business employment is found in firms with more than 20 employees, which are expected to account for roughly 55 percent of this market’s employment by year’s end. Estimates from the SBA indicate that firms with fewer than 100 workers employed 40.9 million of the 57.1 million small business total.

In-Stat/MDR’s analysis of the market finds that the services vertical accounts for 35 percent of small business employment, followed by retail trade (23 percent), manufacturing (11 percent), construction (10 percent), and wholesale trade (9 percent).

Small businesses generate 60 to 80 percent of net new jobs annually, according to the SBA, employing 39 percent of high tech workers, and producing 13 to 14 times more patents per employee than large patenting firms.

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