Small and midsize companies are keen to expand their workforces, but economists suggest that many job seekers are gravitating towards larger firms offering higher pay.
According to the federal Job Openings and Labor Turnover Survey released on Tuesday, employers with fewer than 1,000 workers accounted for the majority of job opportunities in February. However, filling these positions presents a challenge.
While private employers added 184,000 workers in March, exceeding expectations and showing improvement from February, smaller companies in the 20 to 49-employee range shed 11,000 positions last month.
Nela Richardson, ADP’s chief economist, highlighted the competitive nature of the labor market, particularly for smaller businesses.
Despite layoffs earlier in 2024 and a lengthier job search process for many, there remains a strong demand for workers.
Richardson emphasized, “It’s easier to hire, but it’s not easy to hire.”
ADP found that wages across the economy are rising faster than inflation, with job changers seeing average raises of 10% compared to the previous year.
Many workers are attracted to firms offering substantial pay increases, possibly leading them to larger companies. Richardson suggested that smaller businesses may also be hesitant to hire, possibly due to resource constraints or other factors.
Despite these challenges, small businesses have played a significant role in job vacancies over the past few years, contributing to the prevailing demand for labor. However, they still face difficulties in recruiting qualified candidates due to limited resources.
The post-pandemic startup boom has further intensified talent competition, contributing to labor shortages in certain sectors.
Additionally, high interest rates pose challenges for small businesses, as they often face higher borrowing costs compared to larger companies.
While the Federal Reserve is expected to lower interest rates at some point this year, uncertainty remains regarding the timing.
This uncertainty could impact the Bureau of Labor Statistics’ March jobs report, set for release Friday morning.
Despite potential challenges, economists anticipate a healthy labor market in the first half of the year, with demand for labor remaining above pre-pandemic levels.
