May 18, 2022

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Small business hiring slowed in September

While small businesses continued to add jobs in September, the pace of hiring slowed, according to a new report from payroll giant Paychex.

The Paychex | IHS Markit Small Business Employment Watch, released Tuesday, indicated that the pace of small-business employment growth improved this summer, but monthly gains slowed considerably to 0.45% in August and 0.15% in September. Despite the slowdown, the Small Business Jobs Index component is approaching nearly 100, at 99.95. Hourly earnings growth increased to 3.68% in September, its fourth monthly increase in a row. At $29.68 in September, hourly earnings have improved by $1.05 from a year ago, the first time that year-over-year gains reached $1 since reporting from Paychex began 10 years ago.

The report points to continuing signs of improvement in the economy and the job market, even as millions of open positions continue to go unfilled at companies small and large despite the lapse of enhanced unemployment benefits from the federal government.

“There’s still growth in the mom-and-pop Main Street small to medium-size businesses,” said Frank Fiorille, vice president of risk management, compliance and data analytics at Paychex. “The growth for the past quarter, even though it’s growing every month, continues to slow.”

He attributed the slowdown to various factors, including the Delta variant and the amount of pandemic aid that has left many Americans able to afford to stay out of work. “People still have a lot of money from the stimulus,” said Fiorille. “We think that is going to start shifting as that winds down, whether it’s the rent moratoriums or student loan payments. We think people are going to start coming off the sidelines and maybe they’ll try to get those jobs, so we may see employment start to tick back up.”

The leisure and hospitality industry saw the most job growth, rising 3.86% during the past quarter and ranking in first among the various sectors for the first time since 2012.

Construction had the second weakest jobs index and the lowest 12-month growth rate at 0.84% among the various industry sectors. Financial activities is the only sector with a negative three-month growth rate of -0.06%.

Texas overtook Arizona for the lead among states in job growth, with Dallas leading the way among metropolitan areas on small-business jobs growth, jumping 1.18% in September and 2.85 percent during the past quarter.

In terms of wage gains, five metro areas — Los Angeles; Riverside, California; Denver; Atlanta; and Tampa, Florida — recorded wage gains above 4% in September. Hourly earnings growth in leisure and hospitality increased to 8.14%, the highest among the industry sectors.

Accountants should keep their small-business clients informed about what’s happening in Congress with the infrastructure and reconciliation bills that the Biden administration is trying to move through Congress, according to Fiorille. Both packages contain trillions of dollars in spending and tax benefits, as well as some tax increases, but the prospects for passage are uncertain.

“They’re going to try to deal with this infrastructure stuff and bid out some of that more to the small and medium-size businesses and the minority businesses,” said Fiorille. “We do think we’re going to see an uptick in the business environment. We’ll see what happens, if it gets through or not.”