Small businesses are often cited as being the engine for job
creation in the United States. If that's true, then the engine
seems to be running out of fuel.
That's bad news for job seekers, but more broadly it's bad news
for the economy in general, and for the prospect of savings
accounts seeing higher rates any time this year.
A grim outlook for job creation
SurePayroll, a subsidiary of Paychex that specializes in small
on the conditions at clients' companies. Compiling data from 35,000
small businesses, they put together aggregates of actual payroll
data and opinions about the business environment.
The figures SurePayroll compiled based on August's data paints a
grim picture of employment conditions, both looking backward and
According to the SurePayroll data, hiring among small businesses
is down 1.5 percent over the past year. Average pay at those
companies is down 1.4 percent over the same period. Furthermore,
neither one of those statistics seems likely to improve in the near
future. SurePayroll found that optimism among small business
executives peaked in February of this year, and has since slipped
steadily. Pessimistic managers are unlikely to hire, and unlikely
to hand out big raises.
This focus on payrolls and hiring goes to the crux of the
current economic challenge. This is not a situation where mere
consumer confidence will drive sustainable growth. Households are
struggling under high debt levels. Wealth is down because of a weak
real estate market and over a decade of disappointing stock
returns. Investment income has fallen due to low interest rates on
everything from bonds to savings accounts.
The only potential source of spending growth is to pump new
money into American households in the form of new jobs and wage
growth. Unfortunately, that doesn't seem to be happening in the
small business sector.
Lack of stimulus
The survey found that 82 percent of small businesses have not
sought to borrow money over the past year. This too is a symptom of
pessimism -- if the outlook isn't good, why try to expand? That
lack of borrowing demand helps explain why deposit rates are so
low: With little prospect of lending out those deposits, banks have
no incentive to attract more deposits.
As for the
Federal Reserve's stimulus policy
-- which has also contributed greatly to the low-rate environment
-- the survey results spotlight the flaw in their plan. If the is
no motivation to borrow, it doesn't matter much how cheap you make
the cost of borrowing.
Given the lack of near-term prospects for movement in interest
rates, depositors can only rely on themselves to earn better
interest rates. Make smart choices among savings accounts, money
market accounts and CDs, choosing the right instrument to fit your
needs. Whatever the choice, shop actively to find the most
competitive rate. Until small businesses get more optimistic, those
tactics might be your only chance at seeing