Jobs Report and My Conversation with a Small Businessperson

I had a conversation yesterday with a small business person who I have known for almost twenty years. The family has been doing business for almost 100 years.  We are of like mind and enjoy discussing current events and most importantly current business trends and I stop in the business from time to time. Frankly I still like keeping touch with many small business owners who I used to do business with, not only do I keep long term friendships going, but it helps me know what really is happening on main street.  I consider this information a plus to which many on Wall Street have no access.

When our conversation went into how business is doing the story for me pretty well summed up why the jobs report this morning was awful. Several months ago they hired a new employee to help catch up on some backlogs in work needed at the business. In hiring the company was very up front with the new employee that the job might not last and at the moment it would not be full time. The point was also made if business conditions improved that and the employee showed initiative they might make the position full time. Now they were smart in knowing where the company would get hit with new unemployment tax so they were careful not to work the person enough to penalize the business just in case business did not improve.

Unfortunately business, as most of you know, has not improved and actually declined. So the new employee was let go. Sad for the employee, but the business unlike government must make ends meet. The laid off employee filed for unemployment and was declined as expected. However the laid off employee appealed and won. Frankly since the employer was careful about the hiring it was a surprise that unemployment was awarded after a short work time and fully under the rules should have been denied.

Thus the business is now being penalized for not only laying off the employee, but actually they are being penalized for HIRING the employee in the first place. Simple logic here is clear, do you think the person is going to hire anyone they absolutely do not need going forward? I expect scenarios like this are being repeated over and over across this country. Add in the new health care costs, regulatory costs, and the added worry of much higher taxes on small business from the current administration in Washington DC and you get jobs reports like the one this morning.