SBA: As state’s workforce contracted, small businesses hired

With the slow economic recovery, the only source of job growth in Connecticut in 2010 came in firms with fewer than five employees, according to a new report from the U.S. Small Business Administration (SBA).

Connecticut lost 20,433 jobs in 2010, according to the SBA report. But among firms with fewer than five employees, 6,770 new positions were added.

“When you put resources in the firms with one to three employees, you get a great response,” said Bernard Sweeney, director of the Connecticut SBA District office. “Most people going into business are going off of a career or life change. They have the knowledge of the business, they”™re just going off on their own. ”¦ You tend to have more activity in that area.”

Yet while jobs were being created in the smallest firms, the total number of small businesses still decreased 1.1 percent from 2009 to 2010 and 7.5 percent from 2000 to 2010.

Large businesses ”” ones with more than 500 employees ”” cut 8,117 jobs over the decade, while the quantity of businesses was little changed, according to the report.

“We need to focus on small businesses,” said Patrick J. Flaherty, an economist with the Connecticut Department of Labor. “They”™re the ones that have the most ability to grow rapidly and where (government) policy can have the greatest impact.”

Nationally, Flaherty said, small businesses are the primary source of economic growth. In contrast, Connecticut has historically depended more on larger companies, he said. Moving forward, Flaherty said he imagines the Connecticut economy will try to rebalance and to invest more in small businesses.

During the economic downturn, large employers have been successful in achieving efficiency gains and have found ways to do more with fewer employees, Flaherty said.

“From a business perspective, that”™s a very good thing,” he said. “From the employment sector, that”™s not something we want to be dependent on going forward.”

Despite the employment drop, Connecticut business owners”™ net income was $18 billion in 2010 and $19 billion in 2011, according to the SBA. In 2000 it was $14.3 billion.

There”™s now an opportunity to take steps to help businesses get started and grow, Flaherty said.

Currently, the state”™s ratio of small to large companies is much lower than the national average. Flaherty said the problem with drafting policies to help businesses, however, is that the diverse nature of small businesses makes it harder to have a one-size fits all solution.

“When we have a stronger economy we”™ll have a larger small business sector,” he said. “2010 was a year of transition. It will be interesting to see what the economy will look like when it”™s strong again.”