As the Senate prepares to consider small business jobs legislation this week, a new report by the U.S. Congress Joint Economic Committee (JEC) shows that lending to small businesses has declined in 2010, small business hiring remains flat and the smallest firms continue to reduce hiring.
“Small businesses have been struggling to get the loans they need to expand and create jobs, as this report shows,” said Congresswoman Carolyn B. Maloney, Chair of the JEC. “It is time for Congress to help small businesses get the lending they so desperately need to grow.”
The report, entitled “Small Business Employment: Bank Lending Restrains Job Creation,” finds that the number of small business loans and the dollar value of these loans are both dropping. The number of loans made to small businesses, which peaked at 27.2 million in the second quarter of 2008, has fallen by over 4.8 million since then, a drop of 17.8 percent. The total value of those loans fell by $60 billion to approximately $650 billion.
The report uses an unpublished data series from the Bureau of Labor Statistics to update a May 2010 JEC report analyzing small business hiring between January 2001 and March 2010. The update, which includes data through May 2010, shows that small business hiring has not started to increase, although larger and mid-sized firms continue to increase hiring.
Other JEC report findings:
The smallest small businesses – those with fewer than 50 employees – continue to see declines in hiring, even as large and mid-sized firms began to increase hiring in mid-2009.
Overall, small business hiring remains well below pre-recession levels. In the years leading up to the recession, small businesses hired an average of 44.4 million people each year. In 2008, small business hiring dropped to 40.6 million, and in 2009, it dropped to 35.5 million workers.
Small businesses, which employ three out of every four workers in the United States, continue to face tight lending standards that are limiting hiring.
Higher credit standards hit small businesses especially hard because small businesses lack other funding sources available to larger companies.
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