The end of May denotes the start of the summer season, which brings along with it an increase in temperatures and, in 2008, a spike in the unemployment rate. The latest economic gauges indicate that the nation’s economic situation is gloomy and small businesses are really beginning to feel the heat.

Employment in the U.S. took a hit for the fifth consecutive month shedding nearly 49,000 jobs according to the monthly report released by the Bureau of Labor & Statistics. The unemployment rate jumped from 5 percent in April to 5.5 percent for the month of May – marking the largest monthly spike in more than two decades.
Construction again led the way down in May, shedding 34,000 more jobs, according to the report. Professional and business services — which includes lawyers, accountants, architects and management consultants — declined by 39,000. Manufacturing also continued its steady decline shedding 26,000 jobs. Retail payrolls shrunk by 27,000 jobs, and transportation and warehousing by 10,500.
While many sectors of the economy were busy shedding jobs the Healthcare industry provided some relief, adding 33,900 jobs in May, while restaurants and bars continued to grow by 11,400 jobs.
As the labor market continues to deteriorate, the size of paychecks continue to decline, just as gasoline and food prices surge, and the value of real estate continues to erode the wealth and credit of many small business owners, the “B” word – bankruptcy – is beginning to move to the front of everyone’s mind.

Data released last week from the Administrative Office of the U.S. Courts (AOUSC) showed a 40 percent increase in business bankruptcy filings for the 12 month period ending March 31, 2008. Many economists looking at the data draw a parallel between the troubles that started with sub-prime mortgages and other financial instruments on Wall Street to the current financial pressures that have hit small-businesses. In short, the combination of tighter credit, higher commodity prices, and stagnant sales likely accounts for the rise in business bankruptcies.

NSBA believes that the only way the U.S. economy can bounce back is through the fostering of America’s traditional engine of economic growth – small business. Having created more than 93.5 percent of all new net jobs over the last 20 years it is crucial that entrepreneurs have access to the tools and capital they need to continue to grow their business and help strengthen the economy.