Paychex reported the ninth consecutive month of declines in small business job growth for November, with wages also falling slightly.
The Paychex | IHS Markit Small Business Employment Watch, which the payroll giant compiles with the research firm IHS Markit, indicated a modest decline in small business job and wage growth last month. The Small Business Jobs Index dipped 0.03 percent for the month, 0.10 for the quarter and 0.52 percent for the year to 99.86.
“It has been a slow drip for eight or nine months now,” said Frank Fiorille, vice president of risk, compliance and data analytics at Paychex. “The growth definitely has slowed, whether you look at it over 12 months, quarterly or monthly. My theory on it is that small business is a leading indicator. When we came out of the recession it kind of lagged, and now you’re seeing more of the big enterprise corporations take over, while small business is flattening out a little bit. The other theory is that we are approaching full employment. We did see that in wages starting to pick up and hours worked, though now wages are starting to flatten or not increase as much as they did.”
Tax reform is also having an impact on hiring plans. “Small business is still watching it and waiting,” said Fiorille. “Even though it looks like it’s going to happen, it still hasn’t happened. Our expectation is that it’s the thing that’s hanging over small business’s head. Once that goes in, maybe we’ll see some confidence and some hiring kick in.”
Paychex released a survey last Friday indicating mixed feelings about tax reform among small businesses, with 53 percent of small business owners saying tax reform would not benefit their business, while 47 percent indicated it would be good for their business.
Monthly small business wage growth has slowed since reaching a high of nearly 3 percent in August. Hourly earnings in November stand at $26.09, a gain of 2.77 percent ($0.70) year-over year, but slowing slightly for the fourth consecutive month, Paychex reported Tuesday.
“Although we have seen slight monthly declines in employment growth, the rate of job growth, while still positive, has generally leveled off over the last quarter,” said Paychex president and CEO Martin Mucci in a statement. “It is encouraging to see that hours worked in Florida are back on the rise after recent monthly slowdowns following the hurricanes.”
After sizable declines in the number of hours worked in recent months due to Hurricane Irma, Florida rebounded significantly in November, led by increases in the construction and manufacturing industries.
The recent decline in the national index has been slow and steady. “Though the monthly declines this year have been small, they have been persistent,” stated IHS Markit chief regional economist James Diffley. “At 99.86, the Small Business Jobs Index indicates employment growth, though steady, is now at the slowest pace since 2011.”
Despite slowing 0.55 percent from a year ago, the South experienced solid small business employment growth last month. Also on the positive side, the Northeast jumped 0.32 percent to move into second place among regions for the first time in 2017, largely due to hiring in New England and the Mid-Atlantic states.
In addition to tax reform at the federal level, Fiorille advised accountants and their small business clients to keep a close watch on what the states do with policies such as paid family leave. For example, a new paid family paid leave law takes effect in New York on Jan. 1, 2018 and phases in over the next four years. “It’s pretty complicated and accountants need to really make sure they understand and do all the things that entails,” said Fiorille.