Looking Beneath the Surface

By Andrew Paparozzi
In September 24, 2009

The last set of employment data released by the Bureau of Labor Statistics was a prime example of a “good news, bad news” story. While reporting that nonfarm payrolls fell by 216,000 in August —good news in the sense that the monthly decline continues to moderate from average declines of 691,000 in the first quarter averaging—the BLS also reported that the unemployment rose to 9.7%, as household employment fell by 392,000—bad news in that it highlights a continuing weakness in the labor market and thus restraint on consumer spending. As is often true during turning points, many of the economic indicators being released can fall into the good news, bad news camp.

But there’s something beneath the headline labor market data that could be troublesome. For starters, the data are coming from two different surveys—one based on information obtained from nonfarm company payrolls (actual survey conducted of companies); the other on a survey of households. As the latter focuses on the employment status of individuals, there’s some thought that it is more reflective of developments within the small business community. In other words: The household survey might do a better job of capturing what’s happening among small businesses with no or few employees. Why might this be important? Although mega companies usually grab most of the attention, small business remains an essential element in the fabric of the U.S. economy.

According to the 2007 County Business Patterns from the U.S. Census Bureau, establishments in the U.S. with fewer than 20 employees account for 86.1% of the total, while establishments with 100 employees or more represent just 2.3%. Comparable data for the manufacturing sector are 68.9% and 8.6%, respectively. Granted, there is a disproportionate share of employees and sales among larger companies, but the role of small business should not be underestimated. As for commercial printing, roughly four-fifths of commercial printing establishments (78.2%) have fewer than 20 employees. And at the other end of the spectrum, commercial printing establishments with 100 employees or more represent 4.5% of the total. For a discussion of why establishment counts in our industry must be viewed through a prism of structural change, see NAPL Performance Indicators Metric Tips dated 09/16/2009 and 09/11/2009 .

With the multitude of unresolved and pending issues such as health care, climate change, financial regulations, and tax liability to name some, businesses are operating under a cloud of heightened uncertainty. And the uncertainty is even more pronounced for small businesses, as they usually have less margin for error. For many industries, commercial printing in particular, structural changes are adding additional complexities to an already challenging terrain. Yes, there is good news—the economy is on the road to recovery. The bad news: The recovery is likely to be slow, and there are many potential headwinds—structural and cyclical— on the horizon.

Andrew Paparozzi        Joseph Vincenzino        Kong Lue Wang

Andrew Paparozzi

Epicomm's Andrew Paparozzi, Vice President/Chief Economist, is well-known for his accurate and thoughtful discussions on the economy and US commercial printing industry. A foremost author and speaker on economic business trends in the printing industry, Paparozzi heads Epicomm's Printing Economic Research Center.

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