LITTLE ROCK — The nation’s recovery from the deepest recession since the Great Depression has been notably lacking in the creation of jobs. The U.S. unemployment rate stands at 9.6 percent, and Arkansas’ is 7.8 percent.
But small businesses - which historically create most jobs across the country - revved up in Arkansas and elsewhere for the first six months of 2010.
They added 4.6 percent more jobs in the state through June, compared with a decline of 0.5 percent in the corresponding period of 2009, according to the Arkansas Department of Workforce Services.
Larger companies in Arkansas - those with more than 500 employees - grew 2.2 percent from January to June, the Arkansas Department of Workforce Services said.
Nationally, small-business jobs grew 0.7 percent from January to March this year, the most recent data available, according to the U.S. Bureau of Labor Statistics. For the first three months of 2009, small businesses lost 0.9 percent of their jobs.
The U.S. Small Business Administration defines small companies as those with fewer than 500 employees.
The fact that such busi-nesses take the lead “is particularly true at times of recession and recovery when a lot of transformation is taking place in the economy,” said Michael Pakko, chief economist and state forecaster for the Institute for Economic Advancement at the University of Arkansas at Little Rock.
One reason for the growth of small companies is the creation of businesses themselves - some people started their own companies because they lost their jobs to the recession, said Cheryl Abbott, a regional economist in Dallas with the Bureau of Labor Statistics.
In all of 2009, there was a net loss of about 18,000 jobs at Arkansas companies with fewer than 500 employees, versus a gain of about 29,000 in the first six months of 2010. The Arkansas data include individuals employed by private businesses, including farm workers and the self-employed, but excludes government workers.
From December 2007, when the recession began, through October of this year, Arkansas lost 34,500 jobs overall, the federal labor-statistics agency said. The loss had been 52,000 jobs until the better-than-expected net gain of 17,500 jobs last month, in part because of small-business growth.
According to the federal agency, the state unemployment rate in October was 7.8 percent, one of the highest levels since the late 1980s, even though the recession officially ended in June 2009.
Historically, small companies account for 60 percent of job creation, Federal Reserve Chairman Ben Bernanke noted recently.
But jobs at smaller companies tend to pay less than those at larger companies.
In Arkansas, companies with fewer than 500 employees pay about $650 a week on average, compared with the state average of $672, Pakko said. And those with fewer than 100 workers average about $575, he added.
Pakko said that while “it’s true that the wages are slightly smaller than [at] the big companies ... it is better than no jobs at all.”
Jim O’Sullivan, chief economist at MF Global Ltd. in New York, told Bloomberg News that “the momentum in business activity is up again, and that probably reflects the improvement in small business as well. It increases the likelihood that a true, self sustaining recovery is under way.”
Sam Walls, chief operating officer at the nonprofit Arkansas Capital Corporation Group, said his firm has detected a stabilization among small businesses. For more than 50 years, Arkansas Capital has made loans to Arkansas small businesses.
“At the moment, there seems to be a slight uptick in confidence and activity in that sector,” Walls said.
American Composting, which manufactures and sells compost materials, has grown a bit. The 18-year-old North Little Rock firm has hired two people in the past year and now has 13 employees, said owner Jim Willits.
American Composting has contracts with municipalities such as North Little Rock, Sherwood and Maumelle, which pay for Willits totake their leaves, grass, trees and shrubs - material that is banned from landfills.
He heats that material into compost and sells it to nurseries, landscapers and the agriculture industry, Willits said.
His business has performed well despite the recession, Willits said.
“The grass and trees and organic waste really don’t care about recessions; they just keep on growing,” Willits said.
Willits made the hires because he now delivers the compost to some customers and he needed more drivers.
“The main thing, too, is that we’ve been able to retain employees,” Willits said.
The growth in small businesses is spreading to other firms.
Some banks are gearing up for small businesses.
Arvest Bank has hired two lending agents in central Arkansas in the past few months to focus on small businesses, said Jim Cargill, Arvest’s president and loan manager for central Arkansas.
Arvest is one of the largest Small Business Administration lenders in Arkansas, with 50 such loans in the first nine months of the year.
John Allison, Home Banc-Shares’ chairman, said he expects lending to grow after the passage in September of a law establishing a $30 billion government fund for small business loans.
“We’re going to look at that strongly,” particularly after the regulations for the law are established, Allison said.
Some large national banks are preparing to hire large blocs of employees to serve small businesses.
Charlotte, N.C.-based Bank of America Corp., the largest U.S. bank by assets, last month said it expects to hire 1,000 in the next year to focus on companies with sales of $3 million or less, Bloomberg News said.
Citigroup Inc. is targeting U.S. companies with less than $20 million of annual sales, and plans to hire about 200 bankers by the end of 2011 to court them.
Front Section, Pages 1 on 11/28/2010