The United States added 275,000 jobs in February, signaling continued economic growth and raising confidence that a soft landing can be achieved. But that number doesn't tell the whole story.
New data from Intuit shows that companies with nine or fewer employees, which account for 13 million jobs nationwide, actually reduced their employment by losing more than 23,000 jobs last month, signaling that this important part of the economy needs special attention requires.
Running a small business is a big challenge. About half of new small businesses do not survive the last five years. Despite these adversities, small business owners are proud, passionate, and committed to achieving their dreams, solving problems, and serving their customers. However, they also have the feeling that they are often unable to stand on their own.
One of the reasons small businesses think this way is because their needs are often invisible to policymakers. Economic trend reports, including government data such as current employment numbers, are not designed to provide detailed and real-time data on the smallest small businesses or those with fewer than 10 employees, and are the only government data that cover small business lags of six to nine months.
As a result, policymakers are operating without an accurate, real-time picture of small business health.
To address this gap and support policymakers, Intuit collaborated with a team of economists led by University of Chicago economist Ufuk Akcigit to launch the Intuit QuickBooks Small Business Index. The index is based on data from more than 330,000 Intuit QuickBooks customers, normalized with official government data to provide unique, timely insights that reflect the general small business population.
We hope this new, in-depth data will empower policymakers to make decisions that better meet the unique needs of small businesses.
While the overall economy is strong, our index shows that the health of the small business economy is not doing so well and continues to face severe pressure from inflation and high interest rates. The index showed that small business employment growth has slowed and financial pressures have increased.
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And while higher interest rates help curb inflation, they have taken their toll. In the two-year period since the start of 2022, when interest rates began to rise, our index shows a total of 15 months of negative job growth, compared to just nine months of growth for small businesses.
The use of business credit cards has increased
Additionally, small business owners are increasingly relying on credit cards to fund their business and are paying more due to higher interest rates. Many have dipped into their own savings to pay off credit card debt, and 76% say they have used 30% or more of their credit limit.
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Taken together, these constraints trap small businesses in a vicious cycle that makes it even harder to compete with larger, more established companies, and therefore even harder to grow and create jobs.
This should worry lawmakers in Washington, as small businesses play a critical role in driving employment and innovation across the country. Without targeted attention, we will continue to experience a decline in business momentum, which could have significant long-term consequences.
AI can help small businesses succeed
As policymakers work to maintain and increase the country's economic momentum, here are some key actions, based on data from the Intuit QuickBooks Small Business Index annual report, that will provide a boost to small businesses:
- Provide access to digital tools. Congress should pass the commonsense, bipartisan Small Business Technological Advancement Act because financially and digitally connected companies grow faster.
- Enable AI for small businesses. President Joe Biden should commit to establishing an AI Innovation and Commercialization Institute for Small Businesses, as proposed in the White House executive order on artificial intelligence. Congress should seize a unique opportunity to ensure that new regulations help small businesses take full advantage of AI tools.
- Make credit easier to access. Our data shows that access to credit remains one of the biggest challenges for new small businesses. As Congress debates new capital standards for banks, we strongly encourage policymakers to maintain partnerships between banks and financial technology (fintech) to ensure small businesses can easily access credit.
Even in an increasingly polarized environment, more than 90% of Americans have a positive view of small business owners.
We can help small businesses succeed when we make more informed decisions based on their real-time challenges. Washington should look to the right data and enact policies that make it easier for small businesses to grow and create jobs.
Sasan Goodarzi is CEO of Intuit, the global financial technology platform that provides small businesses with software such as QuickBooks, Mailchimp, TurboTax and Credit Karma.
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