The latest economic numbers point to a further slowing of business at many small companies, and economists say trade wars are a significant reason for the decline.
Recently, payroll company ADP reported that its small-business customers had added just 11,000 new jobs during July at its small-business customers, those with up to 49 employees. The smallest companies, those with under 20 employees, cut 18,000 jobs. The slender gain followed the loss of a combined 45,000 jobs during May and June. It was also far below a gain of 66,000 in April and the 52,000 jobs small companies added on average each month in 2018.
The latest report showed that 5,000 jobs were lost in the manufacturing sector, ADP said.
Meanwhile, the Institute for Supply Management, a trade group for corporate purchasing executives, said manufacturing activity grew at a slower rate during July for the fourth straight month. The ISM includes executives from companies of all sizes.
The trade wars that began with the Trump administration’s tariffs on China early in 2018 and continued with retaliatory duties on U.S. goods are taking a toll on domestic manufacturers, economists say. Companies that import raw materials are paying 25% more on a wide range of products, and those who sell their products overseas are being hit by retaliatory tariffs. U.S. companies including retailers could take a further hit now that Trump is planning to tax $300 billion in Chinese imports, primarily consumer goods, in September.
The trade wars and a slower global economy “are fast at work already doing real damage of the foundation of this economic expansion,” said Scott Anderson, chief economist with Bank of the West, after the Labor Department released its July employment report on Aug. 2. Although employers added 164,000 jobs last month, Anderson said growth in non-farm payrolls fell in the past three months, averaging 1.1% a month, down from a high of 1.9% in January.
Small-business employment is also down because companies are finding it hard to fill their open positions. They face a tight labor market and the fact that they can’t compete with higher salaries and benefits that big corporations offer.
Mark Zandi, chief economist at Moody’s Analytics, said that the “job market is throttling back” because of the shortage of available workers and trade tensions. He said President Donald Trump’s tariffs appear to have caused a decline in manufacturing.