The Paychex IHS Markit Small Business Employment Watch has released its latest findings on the state of small business employment and earnings in the United States. The national Small Business Jobs Index, a key indicator of small business job growth, has shown minimal change, resting at 99.10 in August, representing a slight decrease of 0.04% compared to the previous month. This marks the fifth consecutive month of moderate adjustments in the index, reflecting the stabilization of the U.S. labor market.
The hourly earnings growth rate for small businesses across the nation remained steady at 3.98% in August, unchanged from July. This consistent earnings growth trend has persisted for the second consecutive month and remains below the four percent threshold. These findings reinforce a pattern of gradual and controlled growth within the small business sector.
James Diffley, chief regional economist at S&P Global Market Intelligence, said, "The Small Business Jobs Index moderated for the 5th consecutive month and the flattening of earnings growth both align with a stabilizing U.S. labor market."
John Gibson, president and CEO of Paychex, said, "Our data indicates America’s small businesses are adding workers at a sustained and modest rate. Regarding hourly earnings, last month we reported a growth rate below four percent for the first time since 2021. Seeing that trend continue this month is an encouraging sign that wages are normalizing along with overall inflation."
Further insights from the report include:
Small Business Job Growth Trends: The report reveals a year-over-year decline in the pace of small business job growth, shifting from 99.94 in August 2022 to 99.10 in August 2023. This trend of gradual deceleration underscores the ongoing stabilization in the labor market.
Regional Disparities in Growth: Despite a steady decrease since February 2023, the South maintains its lead in regional small business job growth, achieving an index score of 99.71 for the 17th consecutive month. In contrast, the Northeast saw marginal improvement in August with a growth rate of 0.06%, raising its regional index to 98.59.
State-Level Insights: North Carolina regained its position as the top-ranked state for small business job growth (100.69), surpassing Texas (100.46), despite both states experiencing a slowdown in growth. Notably, only four states exhibited increased job growth rates compared to the previous year, with Wisconsin leading the pack, achieving a 1.77% growth from August 2022 to 99.53.
Industry-Specific Trends: The Manufacturing sector, which had the lowest index at 97.24, experienced significant gains in August (0.21%), demonstrating a positive trajectory despite its lagging performance. In contrast, the Other Services sector, with the highest index of 100.99, observed the most substantial decline in its growth rate from July to August (-0.33%).
The Paychex IHS Markit Small Business Employment Watch is a vital benchmark in the industry, drawing insights from the payroll data of approximately 350,000 Paychex clients with fewer than 50 employees. The comprehensive report offers an in-depth analysis of national employment and wage trends, while also delving into regional, state, metro and industry-specific activity.
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