Sober Look | Jun 06, 2013 06:51PM ET
ADP data on private payrolls has an interesting story to tell about job creation in the US. It is particularly helpful to understand job creation in terms of business size. ADP breaks down businesses into small: 1-49 employees, medium: 50-499 employees, and large: 500 and greater. Using the number of employees to define company size is not ideal. However, as a payroll processing company, ADP only has access to employee count as opposed to any type of revenue data (which is much harder to come by for smaller firms.)
Here are some observations related to growth in payrolls:
1. Since the beginning of 2005, ADP estimates that the US economy has generated a net of 2.6 million private sector jobs.
2. During that period roughly 2.3 million were created by small businesses, 1.3 million by medium businesses, while large businesses lost 1 million jobs.
4. Small business payrolls lag the other two categories both to the downside and to the upside - smaller firms are slower to lay people off and slower to hire (these jobs are therefore more "sticky").
5. Medium sized businesses experienced the largest and the sharpest loss of jobs (from peak) during the recession. That's in part due to the fact that mid-market firms also saw the fastest payroll growth during 2006-2007 period (the "bubble jobs"). A good number of these firms were housing-related (construction firms, real estate brokers, mortgage brokers, small banks, etc.). That, at least in part, explains the sharp rise as well as the decline in middle market jobs.
6. Small business payrolls never fell below their 2005 level and are now near pre-crisis peak.
7. One final observation from the latest ADP data is that job growth in small businesses more recently is almost entirely in service industries (chart below) as opposed to "goods producing".
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