US small businesses cut jobs in February, Intuit data show

Signage for a job fair is seen on 5th Avenue after the release of the jobs report in Manhattan, New York City, US, September 3, 2021. REUTERS

The smallest US businesses shed jobs in February and average revenue fell, a sign of pressure in one vulnerable sector of the economy that preceded the Trump administration's announcement of sweeping new import taxes that could make the outlook even cloudier.

An index developed by software firm Intuit, which provides payroll and other business software to companies, estimated that employment at firms with one to nine workers fell by around 125,000 over the month, to 12.5 million, a nearly full percentage point decline.

While spanning industries, the drop was proportionately largest in leisure and hospitality, where employment fell by around 21,000, or nearly 1.3%.

Leisure and hospitality is particularly sensitive to consumer discretionary spending, and the decline is a possible sign of economic strain developing among households.

Average inflation-adjusted revenue fell nearly $51,000, or -0.79%, according to the latest Intuit data, derived from analysis of 440,000 firms that use the company's payroll software.

Ufuk Akcigit, a University of Chicago professor who developed the index for Intuit, said small firms "are typically the early indicators of what's going to happen ... Wherever things are going, it's typically visible among small business."

Payroll data for February will be released on Friday, and analysts expect another solid reading. Economists polled by Reuters anticipate firms added 160,000 jobs and the unemployment rate remained at 4%.

But Federal Reserve officials have begun flagging possible risks to growth, noting a January drop in personal consumption spending and weaker readings on consumer confidence.

The February employment survey also came too early, economists said, to capture developing layoffs by the federal government and affiliated private contractors, and before the Trump administration announced new tariffs that could also influence business hiring plans.