December 2006

Small Business Continues to Drive US Economy

According to the updated "Small Business FAQ" released by the Office of Advocacy at the Small Business Administration, small businesses continue to drive the US economy. The updated FAQ compiles the most recent small business statistics in a useful and easily understood document.

Small business statistics highlighted in the 2005 "Small Business FAQ" include:

• Small businesses represent 99.7% of all employer firms.
• Over the past decade, small business net job creation fluctuated between 60% and 80%.
• Small businesses generate more than 50% of the non-farm private gross domestic product (GDP).
• Small businesses employ half of all private sector employees.

Also, the Bureau of Labor Statistics recently issued data that show, from September 1992 through March 2005, firms with fewer than 500 employees accounted, on average, for 65% of quarterly net employment growth, representing 13.5 million out of 20.6 million net jobs created by the total private sector.

At the end of the first quarter of 2005, there were 4.9 million firms in the private sector of the US economy. Firms with fewer than 500 employees accounted for 99.6% of all firms and 55.8% of total employment. Of the firms included in the data, 54.4% had 1-4 employees, representing 5.2% of total employment. In contrast, firms with 1,000 or more employees accounted for 0.2% of firms and had 37.4% of total employment.

There have been seven consecutive quarters of overall net employment growth, from September 2003 through March 2005. Firms with 500 or more employees added 1.0 million new jobs, representing 35.9% of the 2.8 million net jobs gained during this period. Firms with fewer than 500 employees accounted for the remaining 1.8 million jobs, representing 64.1% of the total net job gains. During this same period, firms with 1,000 or more employees added 842,000 jobs, representing 30.3% of the total net job gains.

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