NEW YORK – Corri Smith is planning to hire a full-time project manager for her public relations firm and make her part-time assistant full-time. But she has a cautious eye on the economy.
“It’s been a long time since we’ve had some trouble in the economy. It can’t all be wonderful — something will happen,” says Smith, owner of Charlotte, N.C.-based Black Wednesday.
Smith believes an economic downturn is likely in the next 12 to 18 months. “I will be extra cautious with hiring alongside also making plans to stockpile and save revenue,” she says.
Small business owners, who have taken a conservative approach to hiring during the economic expansion, are becoming even more careful amid concerns that the economy is weakening. They’re well aware that economists believe the country’s gross domestic product slowed considerably in the second quarter — forecasts give the GDP an annual rate of about 2%, down from 3.1% in the first quarter. Owners’ concerns and caution are increased by the Trump administration’s trade wars.
Some owners are cutting jobs, some by not filling their open positions and others by laying off workers. A report from payroll processor ADP released last week showed that its business customers with up to 49 employees cut 23,000 jobs in June on top of a 38,000-job reduction in May; this is the first time ADP has reported job cuts since September 2017.
Although the Great Recession ended 10 years ago, small business hiring never recovered to the levels before the downturn began in 2007. Owners who had laid off workers didn’t want to go through that devastating process again, and new entrepreneurs learned from the unhappy experiences of others.
Ethan Segal’s decision to hire freelancers for his internet marketing firm was based partly on the economy. After the Federal Reserve raised interest rates in December, some of his largest clients put their projects on hold.
“All of them decided to table not just my work but other companies’ as well. It was shocking and sudden,” Segal says. There are now about 10 freelancers working at Philadelphia-based Segal & Co.
Many small businesses also struggle to find qualified workers. While that can be a problem for companies of all sizes, small businesses generally can’t offer the salaries and benefits that big corporations do, and with an economy that’s looking iffy, the smaller players are at an even greater disadvantage.
Because of competition for staffers from giants like Google, Facebook and Netflix, not only does software maker Gunner Technology not expect to hire in the next year, “we are looking at how we can get by without replacing employees we are sure to lose,” CEO Cody Swann says.
Swann’s solution is to automate some of the work that software developers generally do at his Las Vegas-based company; for example, reviewing software coding to detect errors.
The tariffs that the Trump administration has placed on thousands of products imported from China and retaliatory duties placed on U.S. goods are affecting many small businesses, even if they’re not importers or exporters. Software manufacturer Joe Wilson might have to put off hiring freelancers if he feels the ripple effects of tariffs that his customers must pay.
“These issues impact the economy and people’s confidence in the economy. It’s easy for a business to defer spending money on a software project for a couple of quarters if they are worried about these things impacting their sector,” says Wilson, owner of Volare Systems, based in Highlands Ranch, Colo.
Wilson uses freelancers because his work often involves customers’ projects rather than their ongoing needs. He has three now and hopes to hire two to five more in the next six months to a year — as long as the economy and/or tariff issues don’t slow his business.