Paychex reported slight gains last month in employment and wage growth at small businesses, as the tight labor market appears to be holding back more robust growth.
The Paychex | IHS Markit Small Business Employment Watch, which the payroll provider compiles with the research firm IHS Markit, found hourly earnings increased 2.33 percent year-over-year, while job growth stayed relatively unchanged. At 99.18, the Small Business Jobs Index is consistent with last month’s level, but slowed 0.23 percent during the past quarter and 0.75 since this time last year. Meanwhile, the rate of hourly earnings growth in September was 2.33 percent ($0.61), ticking up for the first time in over a year. At 2.65 percent, however, weekly earnings growth slowed during the past year, although the number of weekly hours worked was up year-over-year for the 22nd month in a row.
The top region of the country for employment growth was the South, while for wage growth it was the West. Texas ranked in the top spot among the states for job growth, while Arizona ranked in first place on wage growth. Denver remained in first place among metropolitan areas on job growth, while Phoenix regained the lead among metro areas in wage growth. In terms of industries, the leisure and hospitality sector remained in first place for hourly earnings growth.
Frank Fiorille, vice president of risk, compliance and data analytics at Paychex, doesn’t see much change in the numbers in the past month. “There’s not much volatility,” he said. “There’s still growth, but the growth continues to decelerate very slowly month to month to month. There’s not been any jump up or jump down.”
One reason for the tepid growth could be employees changing jobs, going from smaller to larger businesses. “Our hypothesis is right now in the business cycle, employees have their choice to work for big companies or small companies,” said Fiorille. “What you’re seeing is all companies are having a tough time finding and attracting talent, but smaller businesses are having a tougher time, so you’re seeing the growth in smaller businesses less than you’re seeing in the larger enterprise companies.”
Asked about what advice accountants should give their small business clients, Fiorille recommends they keep an eye on changes in state and local laws and regulations. “We’re watching changes at the federal and state level all the time, and the amount of changes that are going on within the states is the highest we’ve even seen,” he said. “It has overtaken the federal level. I recommend they keep in touch and watch that very closely because there’s a lot going on at the state and municipal level.”
