Small businesses continue to play an important role in Hawai'i's economy, accounting for more than half of the non-farm labor force, according to a report by the U.S. Small Business Administration Office of Advocacy.

The SBA recently released updated profiles of the 50 states that included information on the number of small businesses, minority-owned businesses and employment figures of each state. A "small business" is defined as having fewer than 500 employees.

Nationally, the number of small firms increased from 25.8 million in 2005 to 26.8 million last year.

Small businesses employed 50.9 percent of the country's non-farm private labor force in 2004, which was the latest year that statistics were available.

"Small businesses are America's job-creating dynamo," said Chad Moutray, chief economist with the SBA Office of Advocacy. "Clearly policymakers need to consider their impact in small business when they are making policy decisions."

In Hawai'i, there were 117,200 small businesses in 2006, a 3 percent increase from the 113,800 a year earlier. Employer firms reached 31,200, up 2.3 percent from 2005, and of this total 96.9 percent were small businesses, the report said.

Non-proprietor's income, which is a partial measure of small-business income, rose to $3.1 billion last year, compared with $3 billion in 2005.

Andrew Poepoe, SBA district director in Hawai'i, said the figures are a reflection of the state's strong economy.

"(The report) shows that Hawai'i has been strong over the past few years and actually more small businesses are succeeding," Poepoe said. "It's a major change from the middle of the '90s when we saw so much trouble in the local economy. We're happy with the numbers."

Poepoe cautioned, however, that economists are predicting a slowing of the state's economy, and that could affect small business.

"They're looking at a slowdown, so we are making our plans to see how we can help and adjust to the changes in the economy," he said.

Other highlights of the report: