Paychex | IHS Markit Small Business Employment Watch: Small Business Employment Growth Drops in May

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The Paychex | IHS Markit Small Business Employment Watch for May shows a continued decline in small business job growth, but an increase in wages for the fourth consecutive month. According to the report, the Small Business Jobs Index declined 0.16% in May to 100.34, a 0.25% decrease in growth year-over-year and its weakest three-month change since July 2009 (-0.44%). National hourly earnings in May were $25.76, increasing 2.87% ($0.72) year-over-year.

“After peaking in February, the Small Business Jobs Index has dropped to its lowest reading since October 2015,” said James Diffley, chief regional economist at IHS Markit.

“The increased pace of small business employment growth that we saw following the election of President Trump has slowed,” said Martin Mucci, Paychex president and CEO. “Small business owners now seem to be taking a more wait-and-see approach to hiring. Despite that, wages continue to rise, which is certainly good news for workers.”

Highlights:

• At 100.34, the national jobs index is at its lowest level since October 2015
• Hourly earnings in May were $25.76, increasing 2.87% ($0.72 YOY)
• South remains the leader in regional job growth; West ranks highest for wage growth
• Tennessee continues to lead in job growth; Arizona tops states for wage growth
• Dallas remains the best metro for small business jobs; Riverside leads in wage growth
• Construction has the weakest 12-month growth rate for jobs nationally; Other Services and Leisure and Hospitality have the strongest wage growth

May 2017 Paychex | IHS Markit Small Business Employment Watch

National Jobs Index

Despite a strong start to 2017, at 100.34, three consecutive declines have brought the national index to its lowest level since late 2015.

The pace of small business job growth is 0.25% slower than in May 2016.

The Small Business Jobs Index had its weakest three-month change since July 2009 (-0.44%).

National Wage Report

Indicating wage acceleration in 2017, both the one- and three-month annualized growth rates are over three percent and have trended above the 12-month growth rate for several consecutive months.

Essentially unchanged from last year, down 0.01 hours, small business employees averaged 32.55 weekly hours in May.

Regional Jobs Index

All four regions are negative for the month, the quarter, and the year.

At 101.14, the South remains the strongest region for small business growth.

Even though its index is down slightly year-over-year, 0.07%, the South also has the best 12-month growth rate among regions.

Regional Wage Report 

Though the South showed the slowest annual wage growth in May, the pace of hourly earnings in the South has increased the fastest among regions during 2017, from 2.29% to 2.54%.

With the strongest weekly hours gain, the Midwest joins the West with weekly earnings growth above 3%.

The pace of hourly earnings growth has been very consistent in the Northeast; currently up 2.77% year-over-year in May, the annual growth rate has averaged 2.76% during the past 12 months.

State Jobs Index

North Carolina and New York remained positive, despite the overall downward trend, with strong May increases.

Georgia continues to fare well in overall BLS employment and still ranks third among states at 101.64, but has decelerated rapidly, falling 1.92% during the past three months.

Florida’s index has averaged 102.00 since the beginning of 2015, with the pace of growth steadily increasing each year.

State Wage Report

Washington led all states for year-over-year growth in both weekly earnings and weekly hours.

While ten other states have annual wage growth above three percent, Arizona led hourly earnings growth for the third straight month among states, gaining 4.63% ($1.06) year-over-year.

At 1.50%, annual hourly earnings growth, Missouri continues to lag all other states and has not yet reached two percent growth at any time this decade.

Metropolitan Jobs Index 

Despite sizable one-month decreases in Dallas, Atlanta, and Miami, the top three ranked metros remained the same in May.

Following an improvement in energy markets, Houston was the only metro with a strong gain in May, and has quickly improved 2.90% since its November 2016 low of 96.14.

Washington fell out of the top five ranked metros in May, decreasing 0.94% for the month and 1.81% during the past quarter.

Metropolitan Wage Report

Riverside, followed by Phoenix and Tampa, led metros in hourly earnings growth. Riverside is now above five percent growth and has exceeded 4% since February 2016.

St. Louis, Philadelphia, and Dallas lag metros with hourly earnings growth less than 2%.

Industry Jobs Index

Manufacturing, the industry with the slowest small business jobs growth, was the only industry sector to improve in May.

Ranked fourth among industries, Construction has the weakest 12-month growth rate at -1.12%. Since late 2015, small business job growth in Construction has steadily improved in the South, but slowed in all other regions.

Industry Wage Report 

The strongest wage growth has come from the industries with the lowest hourly earnings, topped by Other Services and Leisure and Hospitality.

At $25.29, hourly earnings in the Manufacturing industry increased 3.14% from last May.

About the Paychex | IHS Markit Small Business Employment Watch

The Paychex | IHS Markit Small Business Employment Watch is released each month by Paychex, Inc., a leading provider of payroll, human resource, insurance, and benefits outsourcing solutions for small-to medium-sized businesses, and IHS Markit, a world leader in critical information, analytics, and expertise. Focused exclusively on small business, the monthly report offers analysis of national employment and wage trends, as well as examines regional, state, metro, and industry sector activity. Drawing from the payroll data of approximately 350,000 Paychex clients, this powerful tool delivers real-time insights into the small business trends driving the U.S. economy.

About Paychex

Paychex, Inc. is a leading provider of integrated human capital management solutions for payroll, HR, retirement, and insurance services. By combining its innovative software-as-a-service technology and mobility platform with dedicated, personal service, Paychex empowers small- and medium-sized business owners to focus on the growth and management of their business. Backed by 45 years of industry expertise, Paychex serves approximately 605,000 payroll clients across more than 100 locations and pays one out of every 12 American private sector employees.

About IHS Markit

IHS Markit is a world leader in critical information, analytics and expertise for the major industries and markets that drive economies worldwide. The company delivers next-generation information, analytics and solutions to customers in business, finance and government, improving their operational efficiency and providing deep insights that lead to well-informed, confident decisions. IHS Markit has more than 50,000 key business and government customers, including 85 percent of the Fortune Global 500 and the world’s leading financial institutions. Headquartered in London, IHS Markit is committed to sustainable, profitable growth.