Key Small Business Statistics - July 2008

How many jobs do small businesses create?

The data that make it possible to answer this question are derived from Statistics Canada's Survey of Employment, Payrolls and Hours (SEPH), and are regularly published in Industry Canada's Small Business Quarterly. SEPH data exclude self-employed workers who are not on a payroll. Other limitations also apply (see How many people work for small businesses?). Historical employment data for the period from 1996 to 2000 are reported for only three firm-size categories (small, medium and large), so job creation over these years was estimated for the seven size categories (including four sub-categories for small businesses) using ratios to distribute annual employment levels across the size categories. Since 2000, Statistics Canada has been publishing the SEPH data with the seven size categories.

Table 6 and Figure 4 display relative contributions to the net year-over-year change in private sector paid employment by small, medium-sized and large businesses from 1997 to 2007. Over the years, the relative contribution in terms of size varied greatly. During the period under review, each of the business-size categories played the leading role at different times in net job creation in Canada. For five years, in 1997, from 2000 to 2002 and in 2006, small businesses made the greatest contribution to net job creation. On the other hand, large businesses played the leading job-creation role in 1998 and 1999, from 2003 to 2005 and in 2007. The year 2003 was very atypical because job creation only occurred in small businesses with fewer than 20 employees and in large businesses, resulting in skewed relative contributions to job creation. Over the 1997 to 2007 period, small firms accounted for 37 percent of all jobs created, on average, in the private sector.

Table 6: Percent Contribution to the Net Change in Private Sector Paid Employment by Size of Business Enterprise (Annual Averages), 1997–2007^{1, 2}

Year	Size of Business — Number of Employees (Percent Contribution)
	0–4	5–19	20–49	50–99	Small (<100)	Medium (100–499)	Large (500+)
Source: Statistics Canada, Survey of Employment, Payrolls and Hours (SEPH), April 2008, and calculations by Industry Canada. Historical data are frequently revised and, as of 2000, are available on a North American Industry Classification System (NAICS) basis. Updates for the total economy covered by SEPH are regularly published in Industry Canada's Small Business Quarterly. Note 1: SEPH data exclude self-employed workers who are not on a payroll, and employees in the following industries: agriculture, fishing and trapping, private household services, religious organizations and military personnel of defence services. Data in this table also exclude employment in public administration, public utilities (water, sewage and other systems), postal services, public transit, educational services, and institutional and other government-funded health care services, but include employment in the CBC, private practices (physicians, dentists and other health practitioners), and beer and liquor stores. Note 2: Differences between these data and those published in previous versions of Key Small Business Statistics are largely due to revisions to the historical SEPH data. A small proportion of the differences is the result of refinements in the methodology used to separate the private and public sectors. A technical note on the separation of public and private sector employment is available upon request by contacting Customer Services at sbrp-rppe@ic.gc.ca.
1997	3	25	11	10	49	10	41
1998	2	3	14	12	31	29	40
1999	4	-1	9	11	23	25	52
2000	4	18	17	11	50	15	34
2001	16	10	17	13	57	9	34
2002	-2	5	28	31	62	9	28
2003	80	142	-5	-185	32	-118	193
2004	-12	19	-3	1	4	2	93
2005	8	-5	6	11	20	24	56
2006	7	9	13	12	41	19	40
2007	-3	16	15	9	37	23	41

Figure 4: Percent Contribution to the Net Change in Private Sector Paid Employment by Size of Business Enterprise, 1997–2007

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Source: Statistics Canada, Survey of Employment, Payrolls and Hours (SEPH), April 2008, and calculations by Industry Canada. Historical data are frequently revised and, as of 2000, are available on a North American Industry Classification System (NAICS) basis. Updates for the total economy covered by SEPH are regularly published in Industry Canada's Small Business Quarterly.

A significant limitation of these data is that they are for a period when the economy was generally expanding. In a more severe downturn or a recession, the percentage contributions to job creation (or loss) by smaller businesses may be quite different.

Table 7 and Figure 5 show year-over-year quarterly changes in paid employment from the third quarter of 2004 to the fourth quarter of 2007 by business size. Jobs were created in the private sector in every quarter over this entire period and the number of jobs created increased rapidly, especially in 2006. In 2007, the rate of job creation stabilized at about 230 000 per quarter, but remained very high compared with the 136 582 jobs created at the end of 2004. Few jobs were shed in any firm-size category, but some job losses occurred in small and medium-sized businesses and they happened mostly at the end of 2004 and early in 2005.

Table 7: Year-Over-Year Net Private Sector Paid Employment Change and Percent Contribution by Size of Business Enterprise, Quarterly, 2004 Q3 to 2007 Q4^{1, 2, 3}

Year and Quarter	Total Net Change	Net Private Sector Paid Employment Change by Size of Business
		0–4	5–19	20–49	50–99	Small (<100)	100–299	300–499	Medium (100–499)	Large (500+)
Source: Statistics Canada, Survey of Employment, Payrolls and Hours (SEPH), April 2008, and calculations by Industry Canada. Note 1: SEPH data exclude self-employed workers who are not on a payroll, and employees in the following industries: agriculture, fishing and trapping, private household services, religious organizations and military personnel of defence services. Data in this table also exclude employment in public administration, public utilities (water, sewage and other systems), postal services, public transit, educational services, and institutional and other government-funded health care services, but include employment in the CBC, private practices (physicians, dentists and other health practitioners), and beer and liquor stores. Note 2: Differences between these data and those published in previous versions of Key Small Business Statistics are largely due to revisions to the historical SEPH data. A small proportion of the differences is the result of refinements in the methodology used to separate the private and public sectors. A technical note on the separation of public and private sector employment is available upon request by contacting Customer Services at sbrp-rppe@ic.gc.ca. Note 3: Minor discrepancies between total net employment change and the sum of changes by size are largely due to small differences between aggregate and the sum of disaggregated source data.
2004 Q3	130 552	-27 053	33 909	-7 789	-2 517	-3 450	-2 285	12 585	10 300	123 698
Q4	136 582	-13 465	19 337	-758	-2 022	3 092	20 176	51	20 227	113 259
2005 Q1	141 783	9 576	-2 160	-9 829	2 037	-376	20 717	20 266	40 983	101 179
Q2	118 933	6 014	-15 977	11 150	14 808	15 996	29 836	-1 605	28 230	74 715
Q3	117 244	13 828	-12 375	21 284	25 042	47 780	27 908	-680	27 228	42 231
Q4	148 608	12 367	2 631	9 542	16 458	40 997	21 358	9 702	31 060	76 553
2006 Q1	265 882	19 903	29 176	35 436	30 960	115 475	50 761	4 757	55 518	94 892
Q2	271 944	20 696	34 904	36 183	37 267	129 050	38 100	15 682	53 782	89 110
Q3	279 607	14 203	22 851	31 199	26 494	94 747	33 803	19 020	52 823	132 043
Q4	288 568	19 473	13 652	43 636	37 050	113 811	28 763	27 508	56 271	118 482
2007 Q1	215 847	-7 757	21 354	27 581	18 512	59 690	31 844	27 803	59 647	96 510
Q2	220 457	-5 549	18 143	28 570	18 026	59 189	32 824	21 024	53 849	107 416
Q3	242 528	5 811	39 708	34 541	20 939	101 000	30 454	15 899	46 352	95 175
Q4	231 989	-9 695	50 824	35 609	22 579	99 318	29 060	14 317	43 377	89 296
% Contribution to Private Sector Employment Change by Size of Business
2004 Q3	100	-20.7	26.0	-6.0	-1.9	-2.6	-1.8	9.6	7.9	94.8
Q4	100	-9.9	14.2	-0.6	-1.5	2.3	14.8	0.0	14.8	82.9
2005 Q1	100	6.8	-1.5	-6.9	1.4	-0.3	14.6	14.3	28.9	71.4
Q2	100	5.1	-13.4	9.4	12.5	13.4	25.1	-1.3	23.7	62.8
Q3	100	11.8	-10.6	18.2	21.4	40.8	23.8	-0.6	23.2	36.0
Q4	100	8.3	1.8	6.4	11.1	27.6	14.4	6.5	20.9	51.5
2006 Q1	100	7.5	11.0	13.3	11.6	43.4	19.1	1.8	20.9	35.7
Q2	100	7.6	12.8	13.3	13.7	47.5	14.0	5.8	19.8	32.8
Q3	100	5.1	8.2	11.2	9.5	33.9	12.1	6.8	18.9	47.2
Q4	100	6.7	4.7	15.1	12.8	39.4	10.0	9.5	19.5	41.1
2007 Q1	100	-3.6	9.9	12.8	8.6	27.7	14.8	12.9	27.6	44.7
Q2	100	-2.5	8.2	13.0	8.2	26.8	14.9	9.5	24.4	48.7
Q3	100	2.4	16.4	14.2	8.6	41.6	12.6	6.6	19.1	39.2
Q4	100	-4.2	21.9	15.3	9.7	42.8	12.5	6.2	18.7	38.5

Figure 5: Percent Contribution to Year-Over-Year Net Change in Private Sector Employment by Size of Business Enterprise, Quarterly, 2004 Q3 to 2007 Q4^{1, 2}

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Source: Statistics Canada, Survey of Employment, Payrolls and Hours (SEPH), April 2008, and calculations by Industry Canada.

Note 1: SEPH data exclude self-employed workers who are not on a payroll, and employees in the following industries: agriculture, fishing and trapping, private household services, religious organizations and military personnel of defence services. Data in this figure also exclude employment in public administration, public utilities (water, sewage and other systems), postal services, public transit, educational services, and institutional and other government-funded health care services, but include employment in the CBC, private practices (physicians, dentists and other health practitioners), and beer and liquor stores.

Note 2: Differences between these data and those published in previous versions of Key Small Business Statistics are largely due to revisions to the historical SEPH data. A small proportion of the differences is the result of refinements in the methodology used to separate the private and public sectors. A technical note on the separation of public and private sector employment is available upon request by contacting Customer Services at sbrp-rppe@ic.gc.ca.

Small businesses created jobs in each year-over-year period between the third quarter of 2004 and the fourth quarter of 2007, except for the third quarter of 2004 and the first quarter of 2005. Although large businesses created the most new jobs in nine of the quarters over that period, small businesses created more jobs in five of the quarters (Q3 2005, Q1 2006, Q2 2006, Q3 2007, Q4 2007).

Job creation among micro-businesses was the most volatile of the seven firm-size categories. Micro-businesses shed jobs in each of the four quarters in 2004 and in three quarters in 2007. However, between these two periods of job losses, micro-businesses were a significant source of job creation. This is particularly true for 2006, when micro-businesses created more than 19 000 jobs in three of the four quarters.