Disaster recovery, fiscal cliff fears, and hiring slump

Radhika Sivadi

2 min read ·


Small business news was dominated by doom and gloom headlines this week, but every story has a silver lining.

Disaster recovery continues: Thousands of small businesses in New York and New Jersey continue to struggle through superstorm Sandy recovery efforts. Newsday reported that local officials believe that unless many businesses get help, they will close their doors.

The good news? Newsday reports that New York FEMA coordinator Michael Byrne said the agency is open to extending the deadline for disaster loan applications past December 31. Byrne told Newsday that FEMA and SBA want to hear from business owners in need of the deadline extension.

Fiscal cliff fears: The biggest fiscal cliff threat to small businesses is the little-talked-about end of the payroll tax holiday, which would raise the current 4.2 percent payroll tax to 6.2 percent–effectively a 2 percent paycut on a $113,000 salary, reports CNN Money:

"Ending the payroll tax holiday would take away $80 a month from someone earning $50,000 a year."

Owners of a Montana wine shop, an Oregon auto repair shop, and the CEO of Starbucks told CNN Money how that income reduction would impact their businesses when customers start skipping oil changes, or foregoing the higher-priced bottles of wine. Starbucks CEO Howard Schultz told CNN the cut could have "a seismic effect" and that a bad outcome on the fiscal cliff negotiations would have "an avalanche effect on the rest of the world."

The light at the end of the tunnel? While many remain pessimistic that the tax holiday will be retained, CNN Money reports that "the White House has indicated it might like to see a payroll tax cut extension as part of a fiscal cliff deal." In a separate article, CNN reported that one analyst predicts a deal could include a compromise that keeps a partial payroll taxcut in place.

Small businesses halt hiring: The Gallup organization reported the dismal results of the November Wells Fargo/Gallup Small Business Index Survey:

"U.S. small-business owners expect to add fewer net new jobs over the next 12 months than at any time since the depths of the 2008-2009 recession … Small-business owners' net hiring intentions for the next 12 months plunged to -4 in November, down from +10 in July and matching the previous record low recorded by the Wells Fargo/Small Business Index of -4 in November 2008."

Wait, no they haven't: Meanwhile, a reporter at the Phoenix Business Journal pointed to a variety of contradictory reports on small business hiring. He notes that an Intuit survey showed that "nationally, small businesses created 30,000 jobs last month."

Radhika Sivadi