Big corporations get most of the press, but the nation’s economic resurgence is due largely to the corner pizza parlor, the neighborhood electrician who logs invoices on a computer at home, and the sunglasses store where you bought your new shades – the types of small businesses that account for half of the private-sector jobs in the United States.
One out of six Americans – or about 56 million people – work at small firms, the vast majority of them run by a single person or operating with very small payrolls. From late 2009, when the recession began to ease, through 2014, when the U.S. economy generated its best year of job growth in well over a decade, those small businesses were critical to lifting the economic doldrums. More than 7 million of the 11 million jobs created during the recovery have been generated by startups and small enterprises, according to the U.S. Small Business Administration (SBA).
“Small businesses have always been an engine for the economy,” says David Park, manager of business banking for City National Bank. “But their role is becoming more important, and we are seeing some fantastic growth as entrepreneurs expand their operations.”
The U.S. government defines small businesses as those with fewer than 500 employees. Such firms total more than 28 million in number and make up more than 99 percent of American companies. Major corporations, by contrast, number only 17,700, the SBA reports.
Small businesses have been responsible for 63 percent of the nation’s new, private-enterprise jobs, the government says. Most of those jobs are in various types of service industries – for example, certified public accountants, management firms and landscaping contractors. New jobs also are scattered among a wide array of retail and wholesale outlets, construction firms, health care providers, hotels and motels, and restaurants.
Two years ago, when the government tabulated its most recent data on the role of small businesses in ending the recession, SBA economists noted a welcome growth in diversity among entrepreneurs. More and more small-business owners were found to be African-American, Asian, and Latino, and entrepreneurship was growing in urban areas.
As of 2012, 36 percent of small-business owners were women, according to the SBA.
Aging Baby Boomers also are contributing to the mix. More than one in five seniors are self-employed, running a small company rather than simply collecting Social Security, the SBA says.
California has far and away the greatest number of small businesses – more than 3.6 million companies that employ 6.5 million people. Texas (2.4 million companies) is second, followed by Florida (2.2 million companies) and New York (just over 2 million).
“There is a great entrepreneurial spirit in California,” Park says. “We’re proud to support small businesses and help them grow.”