More on job growth

As I said in my last outsourcing post, anecdotes about large corporations laying off workers can crowd out information about smaller firms (traditionally defined as less than 500 employees) that are hiring more workers. Since two-thirds of all new jobs are created by small firms, the latter can more than compensate for the former. MSNBC’s Martin Wolk makes this points in a must-read story on the role that small businesses play in the economy (link via Virginia Postrel). Here’s the part I found interesting:

A study of net job growth in 1996 suggested why small can be beautiful. Firms that were at least two years old that year cut employment by 7 to 36 percent overall, with the biggest job losses coming at the oldest firms. Meanwhile, job growth of nearly 150 percent was seen both at small firms that were less than two years old and at new branch offices and stores opened by larger firms. “For employment growth, it looks as if the more important factor is age and not size,” said the study by economists John Haltiwanger and C.J. Krizan. “One clear pattern that emerges is that net job creation rates decline with plant age.”

That was 1996 — what about the present? Let’s go to the National Federation of Independent Businesses and see what they’re saying about the economy and job creation. The economy first:

[T]he nation’s small-business owners’ outlook bubbled up 1.6 points to 106.9 in December, less than a point shy of the National Federation of Independent Business’s (NFIB) Index of Small-Business Optimism’s 1983 record and the fourth highest in the survey’s history.

As for employment:

Operating small firms added a seasonally adjusted average of 0.19 employees per firm, nearly double the November figure. As a result, the entire fourth quarter was in the black for job creation. Over the past three months, 17 percent of all owners reported increasing employment a seasonally adjusted average of 3.9 employees, and 13 percent reported reducing employment by a seasonally adjusted average of 2.5 employees. Until now, rising productivity and some uncertainty delayed the step-up in hiring that rising sales demand. This productivity cushion has been exhausted and job creation must now fill the gap to ensure that production keeps up with demand. The percent of firms with at least one “hard to fill”job opening rose two points to a seasonally adjusted 20 percent of all firms. This reading is well below the 35 percent reading reached in 2000, but above recession readings of 10 percent reached in 1991. Eighteen (18) percent reported at least one opening for a skilled employee and 3 percent reported at least one opening for an unskilled employee. Overall, it appears that there was substantial job creation in the fourth quarter and that job creation is poised to pick up speed early in 2004. The unemployment rate should fall a few tenths of a point by mid-year.

Obviously, this optimism must be seriously tempered by the shedding of jobs among large firms. Still, one hopes that this is a harbinger of healthy job growth across the board. UPDATE: Hey, Technorati is hiring!! ANOTHER UPDATE: The employment numbers for January are out:

Employment rose in January, and the unemployment rate, at 5.6 percent, was little changed, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Nonfarm payroll employment increased by 112,000, with job gains in construction and several service-providing industries. Manufacturing employment continued to trend down, but the rate of job loss has moderated in recent months.

Not great, but a definite improvement over the 1,000 jobs created in December. Here’s the AP report. FINAL UPDATE: The Chicago Tribune has a story on the rise of self-employment. Most of it is quite informative, but see if you can spot the error that will drive Brad DeLong round the bend and post another “Why oh why can’t we have a better press corps” post!!