Wages Show Positive Momentum as Job Growth Continues to Moderate Amid Tightening Labor Market

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According to the latest Paychex | IHS Markit Small Business Employment Watch, wage growth accelerated in April, while the pace of monthly small business job growth continued to tighten. The Small Business Jobs Index fell 0.12% for the month and is down 0.96 over the past year to 99.53. Hourly earnings grew $0.70 to $26.56, up 2.69% from last year.  One-month annualized hourly earnings growth in April was 3.25%, reaching a two-year high.

“The 2018 moderation in small business job growth continued apace in April, reflecting tightening labor markets across the country,” said James Diffley, chief regional economist at IHS Markit.

“The low unemployment rate is contributing to steady increases in wage growth,” said Martin Mucci, Paychex president and CEO. “With tightening labor conditions and wages continuing to show positive momentum, business owners and HR managers will need to focus on recruitment and benefit strategies to attract and retain qualified talent.”

National Jobs Index

The decline in 2018 has been slow and steady, falling 0.12% in April and 0.35% during the past quarter.

At 99.53, the national index is down 0.96% from last year and is at its lowest level since 2010.

National Wage Report

April’s 3.25% one-month annualized hourly earnings growth was the best rate in more than two years.

Hourly earnings growth has been consistent the past quarter, though annualizing the one-month and three-month growth rates signals positive movement ahead.

Regional Jobs Index

Closing in on the top-ranked South, the Midwest was the only region to increase in April, 0.26% to 99.82.

Ranked last among regions since September, the West has declined 10 of the last 12 months.

Regional Wage Report 

The Northeast was the only region to experience positive month-over-month hourly earnings growth in April, reaching the national level of 2.69%.

At 2.36% growth in April, the South had the largest deceleration in hourly earnings, and is the only region where the three-month annualized growth rate is below 3%.

State Jobs Index

Gaining 0.68% during the past quarter, North Carolina improved to the second-ranked state with a strong index level near 101.

Washington State was the top-ranked state in February, but fell to fifth in April, following sharp declines during the past two months.

Having the lowest index among states for the past six months, Missouri jumped four spots in April and has improved more than 2% already in 2018.

State Wage Report

For the seventh consecutive month, Maryland showed positive gains across all earnings indicators in April. While its hourly earnings growth is low among states at 2.16%, Maryland’s weekly earnings growth, ranks sixth at 2.63%.

Wage growth in Virginia has slowed quickly in 2018, with hourly and weekly earnings growth below 2% in April.

Metropolitan Jobs Index 

Among metros, Denver and Seattle remain in first and second place, but fell significantly with the two weakest one-month growth rates in April.

St. Louis has improved sizably in 2018, climbing over 99 in April and boasting a positive year-over-year growth rate.

At 97.32, Los Angeles had a large decline in April, deepening its last place position among metros.

Headed in different directions, after crossing paths early in 2018, Houston continues to show strong improvement in small business employment growth, up 2.57% year-over-year. Dallas, however, fell below 100 in April and is down 2.60% from last year.

Metropolitan Wage Report

Denver and Miami saw hourly earnings acceleration in April.

Phoenix remains far ahead of other metros with 4.80% hourly earnings growth, followed by California metros San Diego, Los Angeles, and Riverside.

Dallas has the weakest year-over-year weekly earnings growth among metros at 1.23%.

Industry Jobs Index 

Financial Activities had its lowest month in more than 10 years, decreasing 0.71% and falling to the slowest growing industry sector.

At 99.05, Manufacturing improved the pace of small business job growth nearly 1% from last year.

Industry Wage Report  

Education and Health Services, as well as Manufacturing, saw an acceleration in earnings during April.

At 2.28%, Professional and Business Services remains the slowest sector in hourly earnings growth.

With rates nearing 4% and annualized rates at approximately 5%, Leisure and Hospitality has the strongest hourly earnings growth among industries.

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 as of May 31, 2017, across more than 100 locations and pays one out of every 12 American private sector employees.