Job Growth Tightens Among Small Businesses in March; Wage Growth Holds Steady
April 3, 2018 | IHS MarkitEstimated reading time: 4 minutes
Small business employment growth declined slightly in March, while wage growth remained largely consistent, according to the latest Paychex | IHS Markit Small Business Employment Watch. Falling 0.12% to 99.65 in March, the Small Business Jobs Index has been below 100 for the past nine months and has slowed 1.07% since March 2017. Hourly earnings grew $0.69 in the past year to $26.48 for a 12-month wage growth of 2.66%, virtually unchanged from 2.67% YOY growth in February. Due to continued increases in hours worked, weekly earnings growth is higher than hourly earnings growth at 2.90%.
Highlights:
- The Small Business Jobs Index decreased 0.12% to 99.65 in March
- At $26.48, hourly earnings growth increased 2.66% YOY ($0.69); one-month annualized hourly earnings growth increased 2.94%; weekly earnings growth outpaced hourly earnings, up 2.90% YOY
- South leads regions in employment growth; West ranks highest for wage growth
- Tennessee rose to the top in state job growth; Arizona remains first in annual hourly earnings growth
- Denver regained first place among metros in small business job growth; Phoenix continues to lead in small business wage growth
- Construction industry maintains steady job growth at 100.42; Leisure and Hospitality leads industry sectors in hourly earnings growth
- “Small business job growth slowed slightly yet again, to its lowest point in more than seven years,” said James Diffley, chief regional economist at IHS Markit.
“Larger employers are adding more workers than smaller businesses at this time, though the tightening labor market is impacting businesses of all sizes,” said Martin Mucci, Paychex president and CEO. “Interestingly, as job applicants are scarce, this month, we saw one-month annualized hourly earnings increase by nearly three% among small businesses, compared to the annual growth rate of 2.66%. This could be the beginning of accelerating wage growth to attract more employees.”
March 2018 Paychex | IHS Markit Small Business Employment Watch
National Jobs Index
The national index has been below 100 for the past nine months.
At 99.65, the Paychex | IHS Markit Small Business Jobs Index has slowed 1.07% year-over-year.
National Wage Report
Hourly earnings growth peaked at 2.96% in July, but has steadily decelerated to 2.66% in March.
On the strength of increased hours worked, weekly earnings are higher than hourly earnings, up 2.90% year-over-year.
One-month annualized hourly earnings growth improved sizably to 2.94% in March, up from just 2.01% four months ago, in November.
Regional Jobs Index
The South is the only region with an index above 100, with strong job gains in Construction and Manufacturing over the past year.
The West has the lowest index at 99.29, though its levels have been stable in 2018, specifically in the Pacific division.
Regional Wage Report
The West leads regions in earnings growth in March (3.32% hourly, 3.70% weekly).
Hourly earnings growth in the Midwest trails all other regions at 2.27%.
State Jobs Index
Tennessee regained its position as the top state for small business employment growth with an index level of 101.82.
After gaining momentum in the first two months of 2018, Georgia fell significantly in March and is now one of 12 states below 100. This is despite ranking in the top 10 among all states in overall job growth, per BLS.
Texas had the largest one-month gain, increasing 0.66% to an index level of 100.88, the fourth highest among states.
State Wage Report
Arizona, California, New York, and Missouri are the only states with three% or higher hourly earnings growth.
Conversely, Ohio, Virginia, and Maryland trail at less than two% growth in hourly earnings.
Tennessee has seen rapid acceleration in hours worked during the past year, which helped boost weekly earnings growth to 4.51%, second only to Arizona.
Virginia’s hourly earnings have decelerated in recent months, from averaging more than three% during 2017, to below two% in March.
Metropolitan Jobs Index
Vacillating between first and second place for the fourth straight month, Denver displaced Seattle as the top-ranked metro for small business employment growth. Both are the only metros with index levels surpassing 101.
While Houston and Dallas are in third and fourth place among metros, 100.54 and 100.29 respectively, the paths to those rankings have differed. Houston has the best 12-month growth rate, 2.74%, while Dallas has the worst, -2.56%.
Metropolitan Wage Report
The Southwestern metros, Phoenix, San Diego, and Riverside, lead wage gains by a large margin, all with weekly earnings growth above four percent.
Tampa, Seattle, Boston, and Chicago trail significantly, with less than two percent wage gains in March.
Industry Jobs Index
Small business jobs growth in the Construction industry remains stable with an index level of 100.42 in March.
Three sectors, Manufacturing, Professional and Business Services, and Trade, Transportation, and Utilities, have index levels below 99.
At 102.11, Other Services (except Public Administration) leads small business jobs growth, but has the weakest one-month and 12-month growth rates among industries.
Industry Wage Report
Leisure and Hospitality leads industry sectors with 3.89% growth in hourly earnings, with Professional and Business Services trailing at 2.30%.
With solid growth in hours worked year-over-year, Trade, Transportation, and Utilities leads weekly earnings growth among industries, and has been slightly above four% for the past seven months.
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.
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