Applause, applause! The February Jobs Report from the Bureau of Labor Statistics says total nonfarm payroll employment increased by 242,000 and the unemployment rate remained unchanged at 4.9 percent. Definitely a positive sign for the economy as the number of new jobs beat expectations.
Additionally, the number of employed in the separate household survey jumped by 530,000 in February, with the employment population ratio rising from 59.5 percent in December to 59.6 percent in January to 59.8 percent in February. It has been on the rise since October of last year.
"While still quite low historically speaking, the February 59.8 percent was the highest level since April 2009. Keep in mind, though, that prior to this past recession, we topped 63 percent," notes Ray Keating, Chief Economist with the Small Business and Entrepreneurship Council.
Is this positive trend toward job growth sustainable? In my opinion, it's not until the small business sector begins growing again. In contrast to the economy as a whole, according to the NFIB jobs report, small business hiring softened in February. And of those businesses that reported a desire to hire (49%), nearly half said they could find few or no qualified applicants (42%).
Keep in mind small businesses have historically been the job creators in the U.S. Currently, the number of small business closures outpaces the number of start-ups by over 100,000 annually. The first time this has occurred since the Census Bureau began tracking the information several decades ago.
Furthermore, small businesses account for the majority of innovation in our country. Big businesses often have a symbiotic relationship with small firms who are more agile and can help develop innovative products and services more quickly to address market opportunities. Without the ability to grow, innovation could slow resulting in a lack of competitiveness on the global front for the U.S.
You can already begin to see how the lack of growth is affecting the economy by looking at the productivity numbers. Nonfarm business labor productivity - that is, "output per hour ... calculated by dividing an index of real output by an index of hours worked of all persons, including employees, proprietors, and unpaid family workers" - fell by a 3.0 percent annual rate in the fourth quarter of 2015. Over the past 30 years, that was the sixth worst quarterly performance.
So what causes productivity growth and why is it important? Productivity growth is linked to higher wages. Low productivity can in part explain why we aren't seeing wage growth in the U.S.
"Worker productivity is largely about investments in capital goods, innovation and technology (such as the tools, equipment and technology), investment in human capital (that is, education and training), and the economic system within workers function (such as free enterprise (more efficient and productive) vs. socialism (far less efficient and productive)), along with individual attributes such attitudes, abilities and work ethic," notes Keating.
Let me connect the dots for you. If small businesses aren't hiring, they also aren't investing in growth resulting in lost productivity and innovation. Without wage increases, consumers won't be spending and small businesses won't experience increased revenue to thrive.
Back to my original question: Is the February Jobs Report really "all that"? Although the media pundits don't drill down enough to look at the economy from the small business perspective, my bet is that until small businesses are given the support they need to build their enterprises, the U.S. economy will not fully recover. Hyper-regulation, taxes and general economic uncertainty are certain to continue to stifle the economic engine of our country.