A report on Wednesday showed private sector job losses of 693,000 in December, far greater than economists had expected. Small businesses accounted for an unusually large 40 percent of the decline, according to the figures from ADP Employer Services and Macroeconomic Advisers (a pdf of the full report is here).
If a government report on December employment on Friday is as dire as the data from ADP, it may be a sign that another pillar of the economy — small business — is buckling as the recession drags on into a second year.
“Everybody is trying to hang on now,” said William Dunkelberg, chief economist for the National Federation of Independent Business.
“More and more of these firms are in survival mode. They kept thinking consumers will make it, but then December rolls around and sales are still not going anywhere — in fact they’re going down — and finally (small businesses) run out of money,” he said.
The US is not alone in this trend. This morning on the British news there has been analysis of rapidly increasing unemployment across the whole of Europe (and they could probably have added other parts of the world if this had been their brief). The nightmare is that every country and sector’s woes is then feeding the woes of others in a downward spiral. Insightful analysts were saying in the fall that the sharp crisis in the banking sector would lead to an even sharper downturn as the consequences worked their way into the economy over a period of some months, and we are seeing that. In addition, the moves that have been taken to ease circumstances have yet to really bite. So, it seems we are all between a rock and a hard place.