Small-business jobs rise as economy improves

• Increasing small-business hiring%2C borrowing signal growing confidence
• Payroll processor ADP surveys show small employers added 82%2C000 jobs in July
• Fears that health care act would hurt hiring aren%27t substantiated%2C economists say

Small-business hiring and confidence about the future are rising, a signal of the economy's growing strength and diminishing concerns about employee insurance coverage required by the new health care law.

Job creation at small companies has almost doubled in the last six months, reaching 82,000 jobs at firms with 49 or fewer employees in July, according to payroll processor ADP. Borrowing by small businesses and sales of new franchises have also climbed, indicating business owners are willing to take on new expenses and risk.

Surveys by the National Federation of Independent Business say business-owner confidence has risen this year but remains below pre-recession levels.

"There is still a healthy enough middle class to support growth,'' said Don Fox, CEO of Jacksonville-based Firehouse of America, which expects to add 140 Firehouse Subs stores this year, most of them owned by franchisees. ''Unless there's a major change in the environment, we're building out toward 2,500 restaurants.''

Other data also suggest small businesses are ready to grow:

• Small-business borrowing is up 10% this year, according to data through March, according to the Federal Deposit Insurance Corp.

• Small-business loan guarantees through the Small Business Administration's largest program have risen 13% in the October-March period.

• Sales of business franchises are up 4.3% this year, although below last year's 4.9% gain from 2011, according to the International Franchise Association.

The gains are beginning to shift the terms of the debate over the health care law. Under the law, businesses with 50-plus full-time-equivalent workers must offer insurance to people working 30 hours a week beginning in 2015. That mandate, originally slated for 2014, has not deterred hiring as feared, some economists now say.

As more data come in, the law's impact can't be seen in hiring statistics, says Mark Zandi, chief economist of Moody's Analytics.

"I was expecting to see it. I was looking for it, and it's not there,'' says Zandi, whose firm manages ADP's surveys of overall private-sector job creation. If the Affordable Care Act "were causing a drop, you would see meaningful slowing.''

New research from Moody's and other economists also challenges the idea that small employers are hiring only part-time workers to avoid falling under the health care law's mandate to insure full-time workers.

It's true that about 77% of jobs added nationwide in 2013 are part time. But this year's new jobs are concentrated in industries such as restaurants and hospitality that use as much as twice as many part-timers as other companies, Moody's economist Marisa DiNatale found in a July paper. Most industries are actually using fewer part-timers than last year, DiNatale said.

Likewise, FT Advisors chief economist Brian Wesbury says this year's gains in part-time hiring offset a late-2012 drop in part-time jobs when full-time employment was surging. For the last 12 months, 75% of new jobs are full time, according to the Labor Department.