Small-business hiring slips in state as jobs dry up

Small businesses are getting smaller.

A nationwide study of 20,000 companies with fewer than 100 employees showed small-business hiring in Nevada fell in 2008, even as hiring quickened among small companies nationally. SurePayroll's Small Business Scorecard reveals that the average staff size among small businesses fell 3 percent in Nevada, to 4.79 workers. The average small-business work force nationwide grew 3.5 percent in 2008.

Michael Alter, president of SurePayroll, said small businesses suffered more in Nevada than they did nationwide because the Silver State's housing market fell more sharply than housing sectors in most other states. Plus, the leisure sector has borne the brunt of higher unemployment and dwindling discretionary incomes. For the small businesses that rely on big contractors and major hotels for vending deals, the slump in construction and hospitality means fewer jobs. And where big companies close or major projects stall mid-construction, small coffee shops, restaurants and other service companies in surrounding areas see fewer customers, Alter said.

At Panacea Services in Las Vegas, the 50 percent drop in staff size through 2008 came almost exclusively from the building sector's downturn.

Panacea handles storm-water run-off compliance for builders and developers. As construction ground to a halt in 2008, Panacea cut its work force from around 30 people to 15. The business let go mostly laborers who conduct field work, and kept a small core staff of office workers, inspectors and drivers, said Managing Partner Evon Kanagin-Bell.

Executives at Philipp's Communications Co. didn't know 2008 would be a weak year until the spring.

Business for the phone-system installation and repair business typically starts slow at the beginning of each year, and picks up after tax season once companies know their fiscal picture for the year ahead, said co-owner Susan Philipp.

But the post-April uptick never materialized in 2008. As business stayed down, Philipp's had to adjust: Company officials let go three of five phone technicians, dropping the employee roster from 11 to eight people. A sister company slashed 11 of 12 electricians from its staff.

Competition has amplified the revenue slump for Philipp's. Its former technicians, as well as technicians laid off from other communications businesses, now chase the company's clients. And big telecommunications companies, content to focus only on major contracts in flush times, find few large contracts these days, so they're snapping up some of the smaller jobs that Philipp's and other smaller telecommunications businesses always relied on to survive.

Despite drops in sales and staff, Philipp's had to raise salaries for some of its workers in 2008. Philipp estimated that pay jumped 5 percent on average for key employees.

"We don't want to lose good people," she said.

SurePayroll found that small businesses in Nevada increased the size of their paychecks by 0.7 percent on average, to $33,618. The average small-company paycheck nationwide fell 3.1 percent, to $31,610.

Alter said Nevada's higher wages come from staffers' taking on more hours.

"When you see a decline in employees, the other side of it is that the company's workload didn't go away completely," Alter said. "If I own a retail shop, I'm still open the same number of hours and I have to staff the store, so I'll pay existing workers overtime, or give them more hours."

Alter said he doesn't expect a "great year" in 2009 for small-business hiring. Job growth among smaller operations nationally could decelerate to 1 percent in the first half of the year, and pick back up to 2 percent or 3 percent in the second six months of 2009, he said. In Nevada, recovery will likely lag much of the nation. The state's past performances in the SurePayroll study have typically been countercyclical, going positive when the rest of the country languishes or heading downward when the nation as a whole adds jobs.

"Nevada may be a little later to the party when growth happens. As things start to recover, people won't just jump on planes and go to Vegas," Alter said. "They'll wait until they get comfortable, start to generate income and realize their job is real and things are getting better."

Philipp said she has high hopes for 2009, but she also said she believes the local economy will worsen before it improves.

"People are going to spend as little on their business as they can to stay alive, and we see more and more of our customers going out of business," she said.

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