Watch Small Business for Employment Forecasts

Today’s 472,000 jobless claims print once again emphasizes how poor the employment outlook has been. What the macroeconomists all have missed is the creative-destruction character of the US economy: jobs are permanently lost and big companies and replaced by startups — except this time, there are no startups.

Small business was still contracting in May, albeit at a somewhat slower pace of contraction than previously, according to Discover Small Business Watch:

• 35 percent of small businesses surveyed said they believe the economy is getting better, up from 31 percent in April; 51 percent say the economy is getting worse, down a point from the previous month; and 12 percent see the economy as the same, down from 14 percent in April.
• The percentage of small business owners rating the current economy as good or excellent was 12 percent in May, compared to 13 percent in April. The April and May ratings on the current state of the economy are the highest since June 2008. Thirty-two percent rate the economy as fair in May, while 56 percent still think it’s poor.
• Small businesses reporting cash flow issues held steady at 45 percent, the lowest number in seven months. Forty-eight percent reported no cash flow issues, and 7 percent were unsure.
• 28 percent of small business owners say economic conditions for their businesses are getting better, down from 30 percent in April; 44 percent said conditions are getting worse in May, down from 48 percent in April; and 24 percent said things are staying the same, up from 19 percent in April.
• 25 percent of small business owners indicated they were increasing business spending in May, up from 23 percent in April, while 46 percent said they were reducing spending this month, compared with 43 percent in April, and 31 percent said they are spending the same, up from 25 percent in May.

Despite the surging stock market, venture capital investments during the first quarter of 2010 fell by 9% compared to the fourth quarter of 2009.

There simply are no signs of life in the startup sector–not surprising given that the US government is sucking up all the financial sources of the economy along with all the available balance sheet of the US and global banking system to finance its deficit.

Until this changes employment is going to remain dead in the water. The manufacturing boomlet simply has no impact on employment.