What Is So Disturbing About the ADP Employment Report

Every month, and only 2 days before the federal employment report, a large private payroll processing company, ADP, releases their own version. The latest report, issued yesterday, was a big miss; showing that only 156,000 jobs were created in the month.   This was far short of the projected gains of 196,000 workers.

And if a 25% miss in job growth wasn't bad enough, the internal numbers showed that small businesses (those with less than 50 employees) added the bulk of the 156,000 with a total of 93,000 new jobs.  Large businesses, with 500 or more employees, only added 24,000 jobs. The problem with small business job growth is that they pay, on average, only 66% of what larger businesses paid in the report in 2011.  However, the Washington Post article that this statistic comes from, also noted that the disparity in salaries between large and small businesses has been growing for years.  For example, in 2001, it was only 78%.

The fact is, that under Obama, we have created too many low wage jobs.  The middle class, as a percentage of all classes, has reached a 50 year low. This is also why I cringe when Hillary Clinton claims she wants to be "The Small Business President". This ADP report just proves that employment in this country is going in the wrong direction.  To reverse this, we need to lower the corporate tax rates and reduce regulations that are interfering with all business growth; especially large businesses.  And, we need to allow over $2 trillion dollars in overseas profits to be brought back here without being taxed so that companies may consider building more manufacturing here than sending jobs to Mexico and elsewhere.

References:

Private sector adds 156,000 jobs in April vs. 195,000 expected: ADP: http://www.cnbc.com/2016/05/04/private-sector-payrolls-april-2016.html

Big firms pay 50 percent higher wages than small businesses, study shows: https://www.washingtonpost.com/business/on-small-business/big-firms-pay-50-percent-higher-wages-than-small-businesses-study-shows/2012/11/28/e24a1f58-3970-11e2-a263-f0ebffed2f15_story.html

Middle Class Pay Hits 50 Year Low Under Obama - Breitbart: http://www.breitbart.com/big-government/2015/01/21/middle-class-hits-50-year-low-on-president-obamas-watch/

Video: Small Business President | Hillary Clinton: https://www.youtube.com/watch?v=uDBHD7cKvhQ

Collapse of U.S. Growth Puts Business Tax Cut At Center of the Election: http://www.nysun.com/national/collapse-of-us-growth-puts-business-tax-cut/89565/

pb

Kasich is Dead Wrong on Small Business Job Creation

Time and time again, when I listen to John Kasich, he is simply factually incorrect.  For example, in a recent stump speech, he said small businesses creates most of the jobs in this country (see lengthy video link below). The problem is that was only true when I took economics in the 1970's.  Ever since then, large businesses such as Target, Wal-Mart, Home Depot, etc. have been the primary job creators in America; often at the expense of many small businesses. For example, the following chart prepared from the Bureau of Labor Statistics data shows that most of the job creation and employment had come from large companies over the 21-year period from 1990 to 2011.

When someone starts a small business, generally only a few jobs are created.  For example, if someone starts a Karate instruction school or a tanning salon, usually, the owner is the only employee. Even if the business grows over time, maybe only one or two instructors or salon employees will be added over time. However, when Wal-Mart opens a super-center, more than 300 people are instantly employed.  A single McDonalds would add more than 60 workers.

There is another problem with small businesses:  The rate of failure.  In the first year, one in every four new businesses fail.  By year four, 50% of new businesses will have been kicked to the curb, and by the end of 10 years, only 29% of new businesses will be left standing.  In other words, 71% of the jobs created by small businesses will be gone at the end of 10 years.

The biggest reason for failure (49%) is incompetence;  with an additional 30%  due to the lack of managerial experience. With this in mind, I would really like to know what steps Kasich could take to somehow legislate human failings out of existence and minimize job losses at the small business level.

The reality, is that the focus of job creation should be providing a better environment for large corporations.  Lower our world's highest corporate tax rate.  Minimize or eliminate international trade barriers.  Allow corporations to return the more than $2 trillion in overseas profits that are just parked there to avoid paying additional U.S. taxes.  This way, instead of using that money to build their businesses in other countries, those profits would be a major cash infusion into our own economy.  Lastly, we have to improve our educational system so that we don't have to import millions of workers to fill high-paying, science-technology-engineering-math (STEM) jobs through the work visa programs. 

References:

Video: Kasich: https://www.youtube.com/watch?v=cA9BTE4fJxs

Chart Source: Getting Straight on Small Business Job Creation: Firms vs. Establishments: http://www.huffingtonpost.com/jared-bernstein/small-business-job-creation_b_1685869.html

Startup Business Failure Statistics: http://www.statisticbrain.com/startup-failure-by-industry/

Big U.S. firms hold $2.1 trillion overseas to avoid taxes: http://www.reuters.com/article/us-usa-tax-offshore-idUSKCN0S008U20151006

37 percent of Silicon Valley foreign-born: http://www.washingtonexaminer.com/37-percent-of-silicon-valley-foreign-born/article/2583195