Small Businesses Still Feeling the Pain
The ADP report gave some encouraging news to small businesses, showing that these firms added 88,000 new jobs in June. That figure is up from May's 27,000 new jobs. But the jobs situation for small businesses remains mixed. The National Federation of Independent Business, an association that represents small and independent businesses, reports that, while reported job losses per firm were down in June, 9 percent of small business owners added jobs in June, compared with 16 percent that reduced employment. These statistics are important, says Ryding, because small businesses have historically driven job creation in recoveries. In the current recovery, however, the engine of small business appears to be stuck in neutral. "They've been extraordinarily cautious in committing to hiring people." In order to accelerate job growth, says Ryding, encouraging small business hiring is going to be key.
A New Definition of "Full Employment"
Many economists agree that the definition of "full employment" has changed since the recession started, and for the worse. "Full employment," or the "non-accelerating inflation rate of unemployment" in economist-speak, has grown since the start of the recession. Pre-Great Recession, the NAIRU was at around 5 percent, meaning that unemployment below 5 percent could in fact create economic turmoil by triggering inflation. Now, the country may have to get used to higher natural rates of unemployment for some time. "I think there has been an increase in structural unemployment," says Prakken. "The so-called NAIRU has risen from close to 5 [percent] before all of this began to something like 6 now, maybe to 6.5." While he says that this rate might eventually drop back to 5 percent, that decrease may not occur for several years.