Small Businesses Ramp Up Hiring

NEW YORK (MainStreet) — One in five small businesses plan to hire more full-time employees as the economy rebounds and companies feel more confident about the future, according to a recent PNC survey.

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The survey found that 22% of small businesses will ramp up their hiring, which is a 6% increase from 2013 and the largest increase since 2012. Business owners are also optimistic and 32% plan to increase the salaries of their employees, which is a 10% increase since last fall.

"This is going to be the best year for job growth since the recession started," said Gus Faucher, senior economist for PNC Financial Services Group, a Pittsburgh, Penn. financial institution. "Businesses are experiencing stronger demand for their goods and services and will increase their hiring to meet that demand."

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Over one-third or 37% of owners are optimistic about their own company's prospects during the next six months, up significantly from 22% last fall, according to the survey. Their optimism is fueled by higher expectations for the next six months as 55% anticipate increased sales and 41% anticipate higher profits, the most for both since 2012.

"Things are more upbeat for small business, because there are signs of recovery and they are getting to the point where they are more confident about the future," he said.

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The demand stems mainly from businesses having additional access to capital as credit availability has improved, Faucher said. With low interest rates, companies have the ability to borrow money to invest in software, equipment and other capital needs. The survey found that 15% of small businesses said they would probably or definitely take out a new loan or line of credit.

"Businesses experienced a significant drag previously without the increased access to capital," he said. "Businesses were scared since this was the worst downturn. Luckily, they survived. They are being very cautious and they want to make sure there is sustained demand for their goods and services."

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Faucher estimates that job growth will average 200,000 jobs each month for the remainder of the year.

Unemployment will increase slightly for a few months as people who had previously quit looking for a job will resume their search again, he said.

The unemployment rate will remain at 6% for the rest of 2014 and will decrease to 5% to 5.5% by the end of 2015, Faucher said.

Small businesses generate seven out of every ten new jobs, which supports PNC's forecast for a faster pace of U.S. economic and jobs expansion in 2014.

With a mix of salaried and hourly employees, seven in ten owners say a potential federal minimum wage increase would not impact 2014 hiring plans. In contrast, 26% say they would reduce hiring.

This trend is being echoed elsewhere. Small business owners in Los Angeles county said they plan to pursue opportunities to increase their business with 33% who plan to hire more staff in the next 12 months, according to a survey conducted by Ink from Chase, the business card portfolio of Chase, the Wilmington, Del. financial institution.

During the next six months, 33% of business owners plan to hire one to two employees, 58% plan to raise pay for employees in the next 12 months and 60% expect to make more money this year than last year, according to survey conducted by Pepperdine University and Dun & Bradstreet Credibility, a Los Angeles provider of credibility solutions for small businesses. The survey also showed that 53% of small business owners indicated an interest in external financing due to planned growth, expansion or acquisitions.

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"Our 2014 economic forecast found that small and mid-sized businesses are optimistic about growth opportunities for the remainder of the year," said Jeff Stibel, CEO of Dun & Bradstreet Credibility.

Companies are demonstrating more optimism partly because of the consistent monthly job growth, said Joanie Courtney, a senior vice president of Monster Worldwide, a NY-based employment company.

In April, the U.S. economy added 288,000 jobs and the unemployment rate ticked down to 6.3%, the lowest level in 5.5 years. In the past three months, 240,000 jobs were also created, which is a strong improvement over last year.

"This job growth will help fuel additional confidence and hopefully will be contagious to employers who have been cautious about investing and adding to their payrolls," she said.

While employers previously had been focused on controlling costs and generating the maximum amount of productivity out of their current employees, that strategy has become "difficult to sustain and can hinder a company's growth and expansion over time," said Courtney.

Although the current job market remains competitive, individuals will have more options during their job search and employers are likely to increase the speed of the interview and hiring process, she said.

Small business owners now are also less concerned about their current cash flow, said Alice Bredin, a small business advisor to American Express OPEN. Only 49% of business owners currently report concerns about cash flow, compared to 66% in 2011, according to a recent American Express survey.

Business owners also believe they can obtain the capital they need to expand with 72% who agreed with this sentiment, she said. This factor might contribute to a decline in the number of business owners who feel stressed out – only 56% who feel stressed out now compared to 70% two years ago.

"Small businesses are the engine of this country's economy," Bredin said. "They create jobs when they are at the forefront of a growth surge and when they are pulled along with the success of the larger companies around them."

Many companies are hiring the support roles to sales teams currently, which is a good sign that business is picking up, said Ryan Naylor, founder of LocalWork.com, a Phoenix-based employment website.

"This is a great time to keep your resume up to date for those who may feel underemployed," he said. "There is still a big part of the workforce that is employed, but looking."

--Written by Ellen Chang for MainStreet

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