California small businesses cut their staffs slightly in 2008, bucking a modest increase nationwide, according to SurePayroll, an online payroll service for more than 20,000 small companies.
On the other hand, smaller staffs had to work more overtime, so the average paycheck among California firms increased 3.5% while it declined 3.1% nationwide.
SurePayroll President Michael Alter projects that local small businesses will continue to shave the number of workers and probably their average paycheck in 2009.
“California is too much tied up in industries that are declining,” he said, referring to real estate and financial services.
Here’s a look at California and other key small-business states for all of 2008, according to SurePayroll data:
This information is based on the actual payrolls of more than 20,000 small businesses, and therefore more precise than samplings used in other employment reports, Alter said.
Also, “small-business owners were the only engine of growth in the economy in 2008,” he added. “You hear about huge layoffs at giant companies, but not about what’s going on at small businesses.”
Because the job market is soft, small businesses that are hiring will be able to pay less, at least in the first part of 2009, Alter said.
Although nationwide hiring among small companies was up 3.5% in 2008, it slowed each month of the fourth quarter, prompting Alter to project little small-business hiring through the first half of the year.
One way small businesses will cope with fewer workers is by using more independent contractors, those who receive 1099 forms instead of W2s, Alter said.
Their use increased 8.3% in 2008, the biggest yearly jump in four years, according to SurePayroll data. Right now almost four out of every 100 workers at small businesses are independent contractors.
Despite the recession, small-business owners rang out the old year on an upbeat note. In a survey the week of Dec. 29, 73.2% of small-business owners said they are optimistic about the economy, compared to just 56% in November.
“Our conversations with small-business owners suggest that many business owners are assuming a recovery in 2009 and are looking beyond that time period,” Alter said.
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