Paychex | IHS Markit Small Business Employment Watch: Jobs and Wage Growth Slow in June

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The Paychex | IHS Markit Small Business Employment Watch for June shows declines in the rates of small business jobs and wage growth. Following a small increase in May, the Small Business Jobs Index dipped in June to 99.40, marking a 0.69% decrease year-over-year and 12 consecutive months under 100. The pace of annual wage growth moderated, falling to 2.47% ($0.64) in June. It is the first time since early 2016 that wage growth has been below 2.50%. Weekly earnings growth also slowed slightly to 2.73%, while weekly hours worked increased 0.20% year-over-year.

Summary:

• The Small Business Jobs Index decreased 0.20% in June to 99.40
• At $26.65, hourly earnings growth moderated to 2.47% YOY ($0.64)
• South remains the top region for employment growth; West ranks highest for wage growth
• Tennessee ranks first in state job growth; Arizona remains first in annual hourly earnings growth
• Denver continues to lead metros in job growth; Phoenix remains first among metros in wage growth
• Financial Activities was the only industry to show an increase in job growth in June; Hourly earnings growth for Leisure and Hospitality outpaces the other industry sectors at 3.93%

“At 99.40, the national index is at its lowest level since 2010, as small businesses are having difficulty hiring in the very low unemployment environment,” said James Diffley, chief regional economist at IHS Markit.

“Despite the tightening labor market conditions, we’re seeing only modest levels of wage growth” said Martin Mucci, Paychex president and CEO. “With the unemployment rate at historic lows, we’d expect to see accelerating wages in this type of employment market.”

June 2018 Paychex | IHS Markit Small Business Employment Watch

National Jobs Index

• The national index dipped in June after a brief respite in May.
• The Small Business Jobs Index has now been under 100 for 12 consecutive months.
• Reflecting tightening labor markets, the 12-month growth rate has been negative since last March 2017.

National Wage Report

• Despite the tight labor market, earnings growth continues to moderate. Twelve-month hourly earnings growth dipped below 2.50% for the first time since early 2016.
• After topping 3percent two months ago in April, the one-month annualized growth rate for hourly earnings decreased to just 2.31% in June.
• Weekly earnings growth slowed slightly to 2.73%. One-month and three-month annualized growth rates have been very consistent as both are currently 2.65% and have averaged 2.65% in 2018.

Regional Jobs Index

• Despite falling below 100 for the first time since January 2011 and having the weakest 12-month growth rate, the South remains the top-ranked region.
• At 99.04, the Northeast slipped 0.38% in June and now has the lowest index level among regions.
• The Midwest is the only region that currently exceeds its base-year performance of 2004.
  

Regional Wage Report 

• At 3.20%, hourly earnings growth in the West far outpaces the rest of the country. Growth rates in the Midwest and South are more than a full%age point behind. 
• Averaging a full hour more per week than any other region, weekly hours worked in the South are the highest, and growth is the fastest.

State Jobs Index

• Texas lost the momentum gained during the first five months of 2018 in June, but remained one of the six states with an index above 100.
• New York and New Jersey both dropped below 99, joining California and Maryland at the bottom of the state rankings.
• Ranked third and fourth respectively, Michigan and Arizona both had employment gains in June, in the past quarter, and year-over-year.

State Wage Report

• Arizona continues atop the state rankings with 4.55% hourly earnings growth and one-month and three-month annualized rates above 5%.
• California and Tennessee are the only other states with hourly earnings growth exceeding 3%, though New York is close at 2.99%.
• At $29.00/hour, Virginia ranks below only Washington and Massachusetts for average hourly earnings, though growth has slowed considerably during the past year. Hourly earnings growth dropped to 0.63%, far behind the 3.38% growth reported just last year in June 2017.

Metropolitan Jobs Index 

• Improving 1.54% during the past quarter, Phoenix rose to third among metros, while top-ranked metros Denver and Houston both dipped below 101.
• Dallas and Miami had the largest one-month decreases as both indexes fell below 100 in June.
• The top six metros all have positive 12-month growth rates.

Metropolitan Wage Report

• Though still just below 2%, hourly earnings in Chicago have seen notable acceleration in recent months.
• Hourly earnings growth in metro areas including Dallas, Detroit, Houston, San Diego, San Francisco, Seattle, St. Louis, and Washington are decelerating.
• At 3.60%, hourly earnings growth in Denver continues to climb up the metro rankings, trailing only Phoenix and Riverside, CA.

Industry Jobs Index

• Financial Activities was the only industry to improve in June, though it remains the lowest index at 98.57.
• At 99.02, Leisure and Hospitality has trended below 100 since September and fell further in June, 0.33%.

Industry Wage Report 

• Hourly earnings growth for Leisure and Hospitality is well ahead of the other industry sectors at 3.93%, while Professional and Business Services lags at 2.27%.
• Weekly hours worked slowed 0.48% YOY in the Leisure and Hospitality sector.

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, human resources, 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 more than 45 years of industry expertise, Paychex serves over 650,000 payroll clients as of May 31, 2018, across more than 100 locations in the U.S. and Europe, 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.