Small Business Employment Growth Continues to Moderate

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The latest Paychex | IHS Markit Small Business Employment Watch shows another monthly slowdown in small business jobs growth, while wages continue to rise at a steady pace. The Small Business Jobs Index dropped to 99.98 in July, 0.70% lower than in July 2016. An index level of 100 equates to moderate job gains, represented by the employment growth levels seen during the 2004 base year. National hourly earnings in July were $25.90, an increase of 2.94% ($0.74) year-over-year. 

“At 99.98, the Small Business Jobs Index slowed for the fifth consecutive month, falling below the national baseline for the first time since 2011,” said James Diffley, chief regional economist at IHS Markit. 

“Though job growth has continued to moderate following last year’s post-election upswing, wage growth is accelerating at a decent pace,” said Martin Mucci, Paychex president and CEO. “We’re keeping a close eye on the potential impact of minimum wage increases on job growth and hours worked, as well as monitoring the effects of a tightening labor market.” 

July 2017 Paychex | IHS Markit Small Business Employment Watch

National Jobs Index

The baseline index level of 100, represented by the employment growth levels seen during the 2004 base year, equates to moderate job gains.

The pace of small business growth is 0.70% slower this July compared to last, mirroring June’s year-over-year result.

The Small Business Jobs Index declined 0.52% during the past quarter.

National Wage Report

After slowing late last year, hourly earnings have accelerated in 2017, with annual growth rising from 2.74% in January to 2.94% in July.

With hours worked increasing, weekly earnings are up 3.12% over last year.

Regional Jobs Index

At 100.66, the South remains the strongest region for small business employment growth, but has decreased 0.94 percent during the past four months.

Down 0.21% year-over-year, the Midwest has the best growth rate among regions. The Midwest also has the only positive growth over its base year, up 0.89%.

Regional Wage Report 

Annual wage increases range from 3.70% in the West to 2.68% in the South.

Up 2.74% year-over-year, the Midwest is the only region to not see an acceleration in hourly earnings growth as it has been relatively flat since April.

State Jobs Index

Washington had the only sizable gain in July among states, after declining nine consecutive months. The state continues to show the weakest year-over-year growth, -3.28%.

Tennessee remains the top state for small business job growth with the highest 12-month growth rate, 1.48% above last year.

State Wage Report

With a recent and sizable minimum wage increase in Arizona, hourly earnings are up 5.12% year-over-year, far outpacing the second- ranked state, California, at 3.78%.

Weekly hours worked decreased the furthest among states in Arizona, down 0.56% from last year.

Washington is ranked first among states in annual gains for weekly hours and earnings.

Metropolitan Jobs Index 

Though still 0.75% below its base-year level, Houston improved for the seventh time in the last eight months to 99.70. With energy markets strengthening, the metro continues to recover from the record low set in November 2016 (96.14).

At 101.19, Philadelphia is up 0.96% from last July. The Philadelphia index ranks third among metros in July and has the best 12-month growth rate.

Metropolitan Wage Report

Both below two percent, St. Louis and Philadelphia have the weakest hourly earnings annual growth among metros.

Nearing 5%, Phoenix, followed closely by Riverside, lead hourly earnings growth among metros. Phoenix and Riverside diverge in weekly earnings growth, however, as employees in Phoenix are working fewer hours than last year, while Riverside employees have seen an increase in hours worked.

Industry Jobs Index

Leisure and Hospitality had the worst one-month and three-month growth rates among industries. Yet, at 100.02, it remains well ahead of its base-year index level.

At 100.29, Construction edged Education and Health Services (100.28) for second place among metros.

Industry Wage Report 

Leisure and Hospitality is exhibiting strong year-over-year growth in all three wage components; combining hours worked and pay rate, weekly earnings are up 4.95%, the best among industry sectors.

On the other hand, Education and Health Services is lagging in both hourly earnings and weekly hours growth, as weekly earnings are up just 2.70% from last July.

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.