IHS Small Business Jobs Index Indicates Ongoing Employment Growth Despite May Decline

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The Paychex | IHS Small Business Jobs Index declined 0.18% in May, from 100.77 to 100.59, following steady results in March and April. Altogether, however, the pace of small business employment growth has increased 0.22% since the start of 2016. At 101.72, East South Central jumped to the top spot among regions, gaining 0.40%, the best one-month growth rate. Washington remained the top-ranked state index, with its fifth consecutive increase in 2016. Continuing to hold the top spot among metro areas, Seattle’s index increased for the fifth straight month, hitting a record level in May, 104.97. After holding steady in April, small business growth slowed in every industry sector analyzed in May.

“Following three months of consistently strong job growth, the Paychex | IHS Small Business Jobs Index declined 0.18% from the previous month to its lowest level of 2016,” said James Diffley, chief regional economist at IHS. “Nevertheless, at 100.59, the national index continues to indicate positive gains in small business employment.”

“Following steady results during the past several months, it appears small businesses were not able to maintain the same level of employment growth in May,” said Martin Mucci, president and CEO of Paychex. “It will be interesting to see how this trend plays out during the summer months when hiring traditionally increases among small businesses.”   

National Index

After a strong start to 2016, gaining 0.40% during the first four months, the Paychex | IHS Small Business Jobs Index moderated in May, dropping 0.18%. Despite the decline, the national index is just 0.06% off the job growth pace set last May. Likewise, while 100.59 represents the lowest index level of 2016, it is still stronger than the last five months of 2015.

Regional Employment

At 101.72, East South Central jumped to the top spot among regions, gaining 0.40%, the best one-month growth rate. South Atlantic, the other southeastern region, moved into second place and gained 1.02% through the first five months in 2016. Moving west toward the struggling energy sector, West South Central had the worst one-month and 12-month growth rates as its index fell below 100 for the first time in nearly six years. Below 100 and last among regions is New England. The nearby Middle Atlantic matched the national index, falling 0.18% from April, but is still above the national baseline at 100.27, up 0.61% from a year ago.

State Employment Trend

Washington remained the top-ranked state index with its fifth consecutive increase in 2016. Georgia surged past its southern neighbors into second place with a 0.85% increase from April to May. Virginia was the only state to outpace Georgia in May, gaining 0.94 percent from the previous month as its index climbed five spots to sixth place. With Georgia, Florida, North Carolina, and Virginia, four of the top six states are located in the South Atlantic. Down 0.74% this month, small business employment growth slowed the most in Texas as its index hit a five-year low at 100.96. Down 2.51% and 2.00% respectively from last year, Illinois and neighboring Indiana had the two lowest 12-month growth rates among states.

Metropolitan Employment Trend

Continuing to hold the top spot among metro areas, Seattle’s index increased for the fifth straight month hitting a record level in May, 104.97. With the best one-month growth rate, at 0.82%, and boosting its index to 102.92, Atlanta overtook Dallas for the second-ranked metro index. Dallas is at a four-year low, but remains in strong growth territory with an index above 102. May marks the seventh consecutive monthly increase for New York City, which has gained 1.85% year-over-year, second only to Seattle. San Francisco slowed 1.30% its lowest one-month growth rate in more than seven years.

Industry Employment Trend

After holding steady in April, small business growth slowed in every industry analyzed in May. Top-ranked Other Services (except Public Administration) fell 0.23% in May from the previous month. At 98.82, Manufacturing remained the lowest industry index, but had the best month, declining only 0.02%. Education and Health Services is up 0.64% so far in 2016 and, at 101.08, is trending near levels not seen since early 2014. Construction maintained the second-highest ranking among industries, but had the lowest one-month growth rate once again in May. Employment growth slowed further in Professional and Business Services as its index fell to 99.47, down -0.58% from last May and representing a four-year low.