We’re Not Creating Jobs “Fast” Enough!!

The jobs report released by the Labor Department June 3rd shows serious signs of an economic recovery that is sputtering.   Nonfarm payrolls rose by 54,000 last month, the smallest jobs gain in nearly a year.  Nearly 13.9 million Americans are out of work, and more than six million have been out of work for more than six months.   The report shows that while the private sector has been adding jobs for more than a year, the pace has not been strong enough to return the unemployment rate to pre-recession levels.  We’re not creating jobs fast enough!!

Jobs Graph May 2011

In the franchising world, we understand the importance of “pace” – it’s about time to market, it’s about scalability, it’s about fast, convenient service.    Coming out of the 2001 recession, franchise businesses created jobs at three times the “pace” of other businesses.  This year our research shows that the franchising industry has the capability to create 40,000 new businesses, including transfers, that could add more than 350,000-400,000 jobs to the economy, and support the creation of an additional 350,000-400,000 jobs indirectly. 

As IFA member Bill Hall testified before the House Small Business Committee last week, “Small businesses that survived the recession…did so by squeezing every efficiency they could from their operations. Employees became more productive and worked longer and harder. Nonessential employees were cut. Investments and upgrades were delayed…What does this mean? For our industry, the continued lack of available commercial credit is putting a chokehold on our ability to expand to meet demand and create the jobs our country so urgently needs.”

IFA has proposed  steps that can help franchisors and franchisees create jobs at a faster pace

  1. Congress should examine the capital reserve requirements and regulatory scrutiny by the FDIC, the Fed and the OCC that may be unintentionally, unnecessarily and harmfully holding back credit access by small businesses.
  2. Congress should examine how SBA loan guarantees are considered by financial regulators. If regulators are not giving due consideration of SBA loan guarantees when capital reserves are calculated, this pressure can discourage or event prevent banks from lending to small business despite Congress’s intent to expand credit access.
  3. Congress should continue to support legislation like the Small Business Jobs Act, which IFA strongly supported, and which has been a lifeline to small businesses during and following the recession.   The enhanced programs allowed the SBA to leverage over $500 million in taxpayer dollars into just under $12 billion in new loans to small businesses.

New jobs – and a faster pace of job creation – will come from entrepreneurial, small businesses in the service sector.  The more the Obama Administration and Congress can do to reduce the regulatory burden on these businesses and to foster pro-growth policies, the faster the franchising industry can create jobs. And we are very good at “fast service”!

Posted by John Reynolds, President, IFA Educational Foundation