Small business sluggish in 2005? Report says yes

Steven Nichols, chief financial officer of Xtreme Notebooks.com got lucky this time when it came to hiring the right worker for the job.

When he needed a new part-time employee for his Carson City-based online store, he went through Manpower, a temporary employment agency.

"We found someone we really liked and hired him on," Nichols said Wednesday. "He starts with us on our payroll on Monday. We were a little skeptical about going to a temp agency, but we wanted to try someone for a short time to see if they fit. In this particular case, it worked."

Xtreme Notebooks.com may have added an employee, and paid more to keep him, but one employment analyst said this is not the norm in Nevada's economy.

Nevada small businesses experienced little growth so far in 2005, according to a national organization that tracks employment and earnings. It reported dismal numbers for small business hiring and employee salaries.

"Small-business hiring is down in Nevada year to date by 1.2 percent," said SurePayroll president Michael Alter. "Small-business paychecks are down 2.4 percent on average. That's bad news for jobseekers in Nevada. It's tougher to get a job, and if you do get a job, it's going to pay less than it used to pay."

He said this is a tough time to run a small business because most haven't seen growth. The cost of raw materials is up, interest rates are double what they were a year ago - though historically they are still low. So that means it's more expensive to borrow money, fuel is high, but prices are flat - Alter said that's not a great position for a small business to be in. He qualifies a small business as employing fewer than 100.

Nichols said he hasn't noticed any slump in his business. Xtreme Notebooks.com's business is up by about 50 percent from a year ago. He attributes this partly to his professional growth in marketing, "I got a much better feel for what people are looking for online."

In 2004, 1,130 new business licenses were filed in Carson City, which is about 150 less than 2003. So far Carson City has recorded 399 new licenses this year, which is a little below normal.

But SurePayroll's Alter said it is the number of employees on the payroll and the size of their paychecks that accurately show the growth of small businesses.

Across the nation, small businesses are employing an average of 5.87 people. Nevada small businesses employ an average of 4.62 people, according to SurePayroll's April data.

On the salary side, Nevada is also paying less compared to the national average. The national annual salary average is $28,737. Nevada's is $25,257.

But Alter had high hopes for Nevada back in February. Then the state was ranked seventh in a list of top 10 states SurePayroll anticipated to be the best for small business in 2005.

He was wrong.

"We looked at Nevada trends from 2004 and saw that it was one of the top 10 for small-business growth," Alter said. "We assumed it would continue in 2005. Obviously we haven't seen that so far."

SurePayroll Scrunches payroll and contractor payment data for all of its payroll outsourcing customers, and uses that data to generate statistics on the small-business economy. It processes payroll for 15,000 small businesses nationwide. SurePayroll has about 600 clients in Nevada, which it used to get all the state's averages.

And this is exactly what Jim Shabi, an economist with the Nevada Department of Employment, Training and Rehabilitation, said is amiss with SurePayroll's numbers. It's just their clients, he said.

The state keeps records of all the private employers required to report to the state under the unemployment insurance laws.

"Our report is essentially the universe of all employment in Nevada," Shabi said. "What it amounts to is we get numbers from 90 percent of the employment in the state."

According to the third quarter numbers in 2003 and 2004, the state saw small gains in both the number of employers and their employees. Carson City also had more small businesses operating in the third quarter of 2004, and they were employing more people.

The department doesn't have access to payroll information. It also doesn't have any 2005 data, which is when Alter said Nevada's small-business economy took a dive.

The anecdotal evidence continues, and it's a little more optimistic.

Barb Lathrop, manager of Clayton Homes, said in the last year she's added another salesperson, a new service technician and many new contractors. Clayton sells manufactured homes.

"With the economy coming over from California, it is better," she said. "We're getting more for houses. But it's difficult to tell because we've only been open for a year. But I do see an increase in our commissions because we're selling houses for more."

n Contact reporter Becky Bosshart at bbosshart@nevadaappeal.com or 881-1212.