Paychex | IHS Markit Small Business Employment Watch: Job Growth Shows Slight Increase in May

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The Paychex | IHS Markit Small Business Employment Watch for May shows a small increase in the rate of hiring and a slight decrease in the pace of wage growth. The Small Business Jobs Index grew for the first time since January, up 0.07% to 99.60. Job growth among small businesses is down 0.73% year-over year, reflecting tightening labor markets. Hourly earnings grew $0.67 to $26.61, up 2.59% from last year. The pace of annual wage growth is down from its peak of 2.96% in June 2017, but one-month (2.80%) and three-month (2.86%) annualized hourly earnings growth continue to trend higher than the annual rate.

“The national index saw a slight improvement in May, its first since January, but remains below 100,” said James Diffley, chief regional economist at IHS Markit.

“It’s encouraging to see the jobs index increase for the first time since January. The modest rate of growth in small business employment reflects the continuing pressure of the tightening labor market,” said Martin Mucci, Paychex president and CEO.

May 2018 Paychex | IHS Markit Small Business Employment Watch                 

National Jobs Index

• At 99.60, the Small Business Jobs Index increased slightly in May, but is down 0.73% year-over-year.
• Reflecting tightening labor markets, the 12-month growth rate has been negative since March 2017.

National Wage Report

• Hourly earnings growth peaked at 2.96% in June, but has steadily decelerated to 2.59% in May.
• The three-month annualized growth rate improved to 2.86%, increasing for the sixth consecutive month.
• At 2.80%, the one-month annualized growth rate continues to trend higher than the annual rate, but reversed its path downward in May.

Regional Jobs Index

• Back over 99, the West had its best one month gain in more than a year, 0.21%.
• The Midwest was the only region to decrease in May, declining slightly (0.07%) to 99.75.

Regional Wage Report 

• Decelerating further in May to 2.25%, the South is now the weakest region for hourly earnings growth.
• Though hourly earnings growth is only slightly higher in the Midwest, 2.29%, one-month and three-month annualized growth rates are both above 3%.

State Jobs Index

• With its third strong gain of 2018, Texas moved into first place among states with an index level of 101.09.
• Back to 100, Missouri jumped four spots in April and 10 spots in May, improving more than 2% in 2018.

State Wage Report

• Falling below 1% in May, Virginia is experiencing a quick drop-off in hourly earnings growth in 2018.
• Wage growth is slowing moderately in New York, but remains above 3% and near the top of the state rankings.
• Earnings growth in Illinois has picked up in 2018, averaging an $0.08/hour increase per month, compared to only $0.04/hour in 2017.

Metropolitan Jobs Index 

• St. Louis is over 100 for the first time since 2016 and is ranked sixth among metros, its highest ranking in more than 10 years.
• Detroit jumped 0.41% in May and is back over 100 for the first time since May 2017.
• Houston continues to show strong improvement in small business employment growth, up 2.17% year-over-year and over 101.

Metropolitan Wage Report

• Topped by Phoenix, the Southwestern metros remain the leaders in wage gains.
• Seattle has both the weakest hourly earnings and weekly hours worked growth among metros. Ranked positively in 2017, wage growth has quickly lost momentum in Seattle during 2018.

Industry Jobs Index

• At 99.36, Leisure and Hospitality has trended below 100 since September, but had a solid 0.26% gain in May and remains the sector with the best performance compared to the 2004 base year.
• At 100.30, Construction has been above 100 for the past six years, signifying steady small business employment growth.

Industry Wage Report 

• Near 4%, Leisure and Hospitality has had the strongest hourly earnings growth each month of 2018.
• Professional and Business Services has decelerated to 2.17% growth in May, ranking last among industry sectors in 2018.
• At 4.07%, Trade, Transportation, and Utilities leads weekly 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.  

About IHS Markit

IHS Markit is a world leader in critical information, analytics and solutions 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 business and government customers, including 80% of the Fortune Global 500 and the world’s leading financial institutions. Headquartered in London, IHS Markit is committed to sustainable, profitable growth.