Small-business hiring drops off

You don't need to flash any surveys at Bob Tatalovich to prove to him hiring among small businesses has dipped in 2008.

Tatalovich, president of Vegas Valley Office Machines, knows firsthand about the sluggish recruiting.

Vegas Valley Office Machines, which sells, leases and repairs copiers, printers and other business equipment, ended 2007 with 14 workers. Today, the company has 12 employees.

Attrition led to the vacancies. Tatalovich's decision to wait out a souring economy has kept the jobs open.

"We've purposely deferred any hires, where two years ago, we would have replaced those people by now," Tatalovich said. "We want to see how this whole thing (the economy) shakes out."

A new report shows small companies across Nevada have put the brakes on hiring in the first quarter, following a year of brisk employment growth.

SurePayroll, a Glenview, Ill.-based paycheck-servicing company, surveyed the hiring and pay habits of more than 18,000 companies nationwide with 100 or fewer workers. Its findings: The average number of employees among small companies in the Silver State dropped 0.8 percent, from 4.94 workers to 4.91 workers, in the first quarter. That's compared to a 0.9 percent gain in small-business staffs nationwide, and a 0.1 percent increase in the West.

Nevada turned in the worst first-quarter performance among the 21 bellwether states SurePayroll follows closely. It was one of just five states in which hiring numbers turned negative.

The latest numbers reflect a change from a year ago, when Nevada's small companies added 1.3 percent to their staffs, besting nationwide growth of 1.1 percent.

SurePayroll President Michael Alter said Nevada's big exposure to the housing bust is hurting the state disproportionately. Construction is Southern Nevada's second-biggest employer after gaming, with roughly 10 percent of the work force, and a higher-than-average run-up in median home prices from 2004 to 2006 has meant an especially big tumble in values today. Nevada claims the top spot nationally in number of home foreclosures.

The construction sector is a huge industry for small businesses, Alter said, with countless smaller contractors, subcontractors and support companies.

He doesn't expect the bleeding to stop soon.

"I hope by the end of the year that we start to see a turnaround, with more jobs created," Alter said. "But right now, we're seeing more storm clouds than sunny skies on the horizon, and I think that doesn't bode well for the economy in general."

It's that type of caution that's put the brakes on new hires at Vegas Valley Office Machines.

Business has held steady in the last year, but company executives were expecting growth, not stability. So Tatalovich hasn't filled his openings, which are in sales and technology support. He's heard all the talk of a recession, and he wants to wait a few months to see if one materializes. He could be ready to hire again by the beginning of the third quarter.

The slowdown in hiring hasn't reined in small-business paychecks in Nevada, though.

SurePayroll's data show a 1.1 percent gain in Nevada's average small-business wage, from $33,395 at the end of 2007 to $33,762 at the end of March. The quarterly increase was small, but it followed a 16.6 percent spike in the state's small-business pay in 2007.

But bigger pay doesn't mean employees are snapping up raises, Alter said. In a faltering economy, amid slow hiring, fewer workers end up putting in more hours. Upticks in average pay could simply reflect more overtime among workers left behind at companies that have cut back labor forces, he said.

Offering higher pay has helped Tatalovich keep his best employees. He granted raises of about 5 percent at the end of 2007 to fend off competitors looking to poach his best talent.

At Craters & Freighters, a local packaging and shipping company, 2008 has brought an up-and-down performance in both hiring and pay.

The company's work force dipped from 15 at the end of 2007 to 13 in the middle of the first quarter, as revenue dropped 12 percent, co-owner Jon Powell said.

Powell said he's not sure why business fell off, but he speculated that some of the company's big publicly traded clients were taking "a wait-and-see attitude on the local economy."

Those major customers bounced back in late March, though, perhaps in an effort to boost numbers before the end of the first quarter, Powell said.

So Craters & Freighters just brought back the two workers it laid off in the middle of the quarter, and made a new hire to boot. The company now has 16 employees.

Pay is up in recent weeks, too, after slipping during the quarter. A drop-off in business translated into less overtime for employees. Now, with business resurgent, overtime is back up, and so is overall pay. After dipping 10 percent to 12 percent during the quarter, pay at Craters & Freighters is back up to its pre-2008 levels.

"We're holding our own, but we're used to more of an even keel," Powell said. "We're seeing more of a roller coaster now. It's up and down, and that's not something we're used to. It's a little week-to-week. Ordinarily, we operate more month-to-month."

The current economy does offer upsides to small businesses, Alter said.

With job growth lagging, the local employment market is far less competitive than it was a year or two ago, and that makes hiring easier. If you're in a field with long-term potential -- say, dry-cleaning or retail -- it's not a bad time to make some key hires.

"There are great opportunities in a market like this to upgrade your team," Alter said. "At times like this, you can often find very good people for less (pay) than you would normally find them. A great salesperson is always worth their weight in gold, so if other companies are struggling to keep their salespeople in play, it can be a good time to try to hire them away. If you have the capital and the wherewithal, it's a good time to expand."

Contact reporter Jennifer Robison at jrobison@reviewjournal.com or 702-380-4512.