Small But Mighty: No hire calling for small-business owners

NEW YORK — Ken Levien has no plans to hire more people for his real estate project-management company in New York. He says his business has only about 85 percent of the amount of work it can handle because the building industry is still hurting from the recession.

"Things are looking down in the construction business in New York City," he said.

Levien has a lot of company. Many small-business owners aren't hiring or expanding because the outlook for the economy, or their own companies, is uncertain.

That raises the question of whether small businesses will give the economy the boost it needs. Economists say that in past recoveries, small companies were the first to hire. When the economy was improving, they were more nimble than large companies because they didn't have the bureaucracy that can slow the hiring process. Their hiring helped propel the economy.

The economy is growing, but that growth has slowed — and so has the pace of hiring among businesses with fewer than 500 employees. The U.S. economy grew at an annual rate of just 2.2 percent from January through March, according to government figures. That's down from the moderate 3 percent growth during the last three months of 2011.

Levien says his business, Levien & Co., could handle two or three more projects without having to hire more people. The firm handles a variety of commercial-building and renovation projects, but specializes in nonprofits such as museums, health-care facilities, social-service organizations, churches, and synagogues. Clients have included Carnegie Hall.

But "there's not a lot of building going on in New York City," Levien said.

His assessment is backed up by numbers from the New York Building Congress, a trade association for the construction industry. In a report issued last week, the group forecast that construction spending in the city would rise 5 percent this year after dropping 3.5 percent in 2011. But spending is expected to fall 13 percent in 2013. Levien notes that a lot of construction money in New York this year is going toward just one project: the rebuilding of the World Trade Center.

Levien said his company's revenue was stable, but it's still down 11 percent from 2008, the best year his company has had. It's up nearly 30 percent from 2009.

Meanwhile, in Las Vegas, Ruth Furman has become very cautious about her public-relations business, Image Words. So she's not hiring and instead is depending on freelance writers, graphic artists, and administrative help.

"I don't feel comfortable with the ebb and flow of my clients' needs," she said.

Las Vegas was one of the hardest-hit parts of the country during the recession — the housing market crashed and casino business dropped off sharply. Many of Furman's clients are in the area. She now gets more short-term projects than she did before the recession, which means her income is less predictable. Last year turned out to be better than expected — revenue was down only slightly from 2010. But she estimates first-quarter revenue this year was down 13 percent from a year earlier.

Small-business owners don't want to take chances because they can see how troubled the national economy is, said Paul Merski, chief economist with the Independent Community Bankers of America, a trade group.

"If you go through the litany of economic data, it is just not giving small businesses the confidence to hire, to expand," he said. "They don't see the future return on that [expansion], or the future cash flow to take on additional debt."

Wells Fargo & Co. knows the trend firsthand. "More people are paying down their lines of credit than are drawing down on them," said Mark Bernstein, head of the bank's small-business division.

The Great Recession is still fresh in the minds of many small-business owners. "Who would expect small-business people not to be a little bit cautious after this experience?" Bernstein asked.