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Franchise Hiring Accelerates in Robust June Report

Auto dealers hire the most in June. Photo of NY Honda dealer by ps

ROSELAND, NJ – Hiring among franchised establishments in the United States added 33,350 jobs in June, according to payroll processor ADP. A high percentage of the job gains were from auto dealerships. Car dealers are individually a blend of product distribution as well as business format franchises, where the franchisor controls the operating standards in which the auto dealership is run. Professional services such as haircut, nail, and teeth whitening franchises came up second, with restaurants third, followed closely by hotels.

Steven Szakaly, chief economist with the 32,500 franchise strong National Automobile Dealers Association, tells this journal, "The continued recovery in vehicle sales is driving employment growth. New-car dealers continue to hire and expand ahead of the rest of economy, which is a key part of the overall recovery in the auto industry." Started in 1917, NADA is arguably the oldest existing franchise association in the country.

Franchise jobs saw a 3.2 percent growth compared to a 2.1 percent rise in hiring for both small business establishments and total non-farm private employment.

"In June, franchises added the most jobs for any month since December 2013," said Ahu Yildirmaz, vice president and head of ADP Research Institute. "The total number of jobs added was up over 50 percent from May. Auto Parts and Dealers doubled from the previous month." The ADP researcher added, "In fact, franchise jobs outperformed overall job growth since January of 2013."

When asked why franchise employment had grown so much compared to the rest of the private sector hiring, Yildirmaz replied that the private sector is dominated by huge economic areas that are slower in growth. "The relatively slow growth industries in the overall economy are information, finance and manufacturing," says the researcher. "These industries are not franchise intensive, so it is not surprising that the overall job growth is lower than the franchises," says Yildirmaz, stressing that statistically it is a false argument that because a sector adopts franchising, it will grow or hire more.

The ADP National Employment Report revealed on July 2 that total private sector employment increased by 281,000 jobs from May to June. A day later, the Bureau of Labor confirmed it, reporting that total nonfarm payroll employment increased by 288,000 in June. That number brings down the country's unemployment rate to 6.1 percent.

Mark Zandi, chief economist of Moody's Analytics, said that small businesses are hiring robustly of late because the credit environment has made a major turnaround from a few years ago when bankers ignored lending to small businesses. "Lending to small businesses has been very, very strong," says Zandi. The upbeat job indicator is in stark contrast to the downward revision in U.S GDP for the first quarter. The economist also says there was a strong uptick in hiring for construction, which is a significant part that makes up small business enterprises. "At this pace of job growth, the labor market will tighten," says Zandi. Nation's Restaurant News reported in May that restaurants, which have seen months of high hiring rates, experienced a tightening in their labor market. "Kristen Zagozdon, vice president of human resources at Orland Park, Ill.-based Cooper's Hawk Winery & Restaurants LLC, said at a National Restaurant Association panel discussion, "Staffing has got so much more challenging."

Economist Zandi anticipates the economy quickly absorbing the extraordinarily high levels of discouraged long-time unemployed to reach full employment "probably by late 2016." That is just before President Barack Obama leaves office on January 20, 2017.

The ADP job survey measures monthly changes in franchise employment derived from ADP's actual transactional payroll data and in collaboration with investor services' firm Moody's Analytics Inc.


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