According to the latest ADP
jobs survey for June, the private sector's contribution to the job market is smaller than expected. (See the WSJ article, “,”) Yep, looking at the bare-bones private sector, minus Census jobs (which do quite well of padding the employment numbers), the results are somewhat troubling. Large and medium-sized businesses have added jobs, but small businesses with fewer than 50 workers have cut jobs. What's going on?
While I don't have a direct psychic link to the small business community, I suspect they are pondering their future and it looks a bit frightening. One of the largest issues is most likely the new health care plan and the perverse incentives it creates in hiring. (See “Obama's Tax on Job Creation.”) Perhaps businesses are getting a head start on preparing to avoid the health
care mandate and maximize the tax credit they receive for providing health insurance. But it does not bode well for job growth.
Another issue may be the new taxes imposed on the wealthy and small businesses. (See “New Taxes on the Wealthy are Bad News for Everyone.”) The new 3.8 percent Medicare tax on unearned income and the proposed increase in the two top marginal income tax rates will undoubtedly hurt the self-employed as their effective tax rates could potentially double.
Meanwhile, as Congress fiddles (tax breaks on capital gains for small business or not, increased funding for SBA loans or not, financial reform? maybe…nobody knows yet), already-decided policies, such as the Credit Card Act (which could raise the cost of credit for our entrepreneurs), are manifesting themselves in the form of reluctance from small businesses. And who can blame them?
For all the talk of small business being the “engine” of job growth, there is not much fuel to keep that engine running.