On a muggy May afternoon in northeastern New Jersey, customers line up and wait for up to 20 minutes in a small, jam-packed store to speak with Peter Schaffer. He’s the key to getting their motorcycles back on the road after a long, idle winter.
Schaffer, a 60-something, mustached man with a deep, confident voice and a quick smile, is co-owner of Circle Cycle in Ridgefield, a longtime fixture in this densely populated, traffic-snarled suburb just west of New York City. He and a crew of four have been repairing motorcycles and selling parts and accessories for more than three decades, making him a walking encyclopedia of all things motorcycle and earning him the trust of his customers.
Here, the Great Recession is in the rearview mirror. The lean years — when big-ticket discretionary purchases such as motorcycles were rarely made, and when high-markup retail items such as leather boots and jackets sat on the shelf undisturbed and worn-out tires were asked to make it through one more riding season — are over. Cautious optimism is in the air.
“As soon as the weather gets nice, everybody wants their bike back on the road, and we get hit all at once,” Schaffer said. “Things get pretty crazy around here, especially on Saturdays. I’m actually looking for another certified mechanic to start part time. Actually, we probably could use him full time as long as he really knows what he’s doing. It’ll be like this through the summer because everybody wants to take their bike down the shore. Hopefully, this will be one of our best years in a while.”
For small businesses like Circle Cycle, the recent headlines about the economy have been encouraging. U.S. employers added 223,000 jobs in April, according to the Labor Department, marking 62 consecutive months of private-sector job growth. The unemployment rate decreased to 5.4 percent, down from 10 percent at the height of the Great Recession in 2009.
Though wages have stayed flat, consumers were feeling better about their purchasing power as the economy improved. The New York-based Conference Board private research group said its index of consumer confidence unexpectedly decreased to 95.2 in April from 101.4 in March, but that was still far higher than the 53.7 average for the 18-month recession that ended in June 2009.
And corporate America has been celebrating record profits, with the Dow Jones Industrial Average nearing its March 2 record of 18,288.63 for much of the spring.
“The data we’re seeing is largely positive,” said Dr. Eric Liguori, assistant professor of entrepreneurship at the University of Tampa and a vice president at the U.S. Association of Small Business and Entrepreneurship, a group of academics that supports small businesses through research and education.
“According to recent data, roughly 75 percent of small business owners are confident that the economy is going to be strong for the next 12 months, so the outlook is pretty good. Growth has been incremental but steady.”
The private sector has added 12.3 million jobs over the past four years, and small businesses have accounted for about two-thirds of those gains, according to Beth L. Goldberg, New York District director for the U.S. Small Business Administration, which provides counseling, credit and federal contracting for small businesses.
In the wake of the financial crisis, many banks severely tightened their standards for small-business loans, making it difficult for small businesses to get off the ground or expand. The Small Business Administration can offer guarantees on these loans and education for small business owners to give them a greater chance at success.
According to the latest data from the Small Business Administration, almost 66 percent of small businesses will survive their first two years, Goldberg said, and among those that fail, a leading cause is a lack of business experience among the principals, not a challenging economic climate. The four-year survival rate is between 55 percent and 60 percent, Goldberg said.
“Small businesses like car washes have been the engine of this recovery,” she said. “When the recession hit and a lot of people lost their jobs, they had to look at the alternatives that were available to them, and many of them said, ‘I’ve got an idea, and I’m going to go for it.’ That’s the American spirit, the American dream.”
Despite the recent robust growth, small businesses still face several challenges, including the possible raising of the federal minimum wage and the implementation of the Affordable Care Act, said Raymond J. Keating, chief economist at the Small Business & Entrepreneurship Council, which represents about 100,000 small-business members and advocates for free-market public policy in Washington.
The federal minimum wage has been $7.25 an hour since 2009, and the push by President Obama and congressional Democrats to raise it to $10.10 or above has met stiff resistance from congressional Republicans in the majority and business leaders. But 29 states and the District of Columbia currently have minimum wages that are higher than the federal minimum, and last November, voters in the reliably conservative states of Alaska, Arkansas, Nebraska and South Dakota approved hikes to the minimum wage.
Last year, the city of Seattle raised its minimum wage to $15 an hour, and this year, Wal-Mart Stores, the largest private-sector employer in the U.S., said it would raise its starting minimum wage to $9 an hour, affecting about 500,000 employees. For small-business owners such as car washes, a higher minimum wage can be the difference between running in the red or the black, Keating said.
“Raising the minimum wage is a fascinating issue because it polls really well, but most economists will tell you that it’s not a good idea, and most small business owners agree because they’re the ones who see that increased cost,” he said. “It’s straightforward: If you raise the minimum wage, you limit the opportunities for the folks you’re trying to help — young workers who are trying to gain experience in the workplace. When you raise the minimum wage, those jobs often get eliminated because small business owners look to save money by shifting those responsibilities to other workers. Small businesses are really on the front line with this because the larger businesses are better equipped to absorb that cost.”
Liguori said that if the minimum wage increases, small businesses will be under pressure to raise wages for workers making slightly above the minimum wage to stay competitive and retain talent, and those additional costs are likely to be passed on to the consumer. The effects on small businesses can be hard to sort out, he said. On the one hand, consumers will have more money to make purchases, but higher prices from higher labor costs could depress sales.
“Inevitably, it’s going to drive up costs for the consumer,” Liguori said. “Your Big Mac, your auto parts, all the things you buy are going to be more expensive. Any time the cost of labor goes up for small businesses, they will either pass on the costs to consumers or look at using fewer employees and using those employees more efficiently, or both.”
The Affordable Care Act, or Obamacare, requires businesses with 50 or more full-time-equivalent employees to provide health insurance to at least 95 percent of their full-time employees and dependents up to age 26 or to pay a fine, beginning in 2016. Keating said some small businesses simply will shift full-time workers to part time to avoid the increased costs, or they simply might refrain from hiring.
“The Obamacare issue still looms,” he said. “Some small business owners are saying that they’re not quite sure how much they should hire or invest in their businesses until they know how much this will cost them.”
Back in May at Circle Cycle, however, the focus wasn’t on wages or health care; it was on the steady stream of customers fattening the cash register and looking to get back onto two wheels. In addition to repairing several damaged or neglected motorcycles, Schaffer’s crew would perform more than a dozen oil changes on this day while selling several helmets and tires. Business was brisk.
“Things could always be better, but we’re doing all right,” he said.