Small Business Wage Growth Moderates as 2022 Closes
The Paychex | IHS Markit Small Business Employment Watch indicates a 4.95% year-over-year wage growth for small businesses in December, down from previous months. The Small Business Jobs Index remains flat at 99.38, reflecting stability in employment growth despite inflationary pressures. Key data highlights include a regional jobs index growth in the South and varying performance across states, with Tennessee showing notable improvement. The leisure and hospitality sector leads hourly earnings growth while overall weekly hours worked growth remains negative over the past year.
- The November jobs index was unchanged at 99.38, indicating stability.
- The jobs index in the South has improved for the third consecutive month, reaching 100.72.
- Tennessee saw a 3.20% increase in its jobs index, reflecting significant recovery.
- Hourly earnings growth has slowed to 4.95%, the lowest since March 2022.
- One-month annualized weekly hours worked growth remains negative for the past 20 months.
Paychex data also reveals that small business job growth remains steady
ROCHESTER, N.Y., Jan. 3, 2023 /PRNewswire/ -- The rate of hourly wage growth for U.S. small businesses continued to decline to 4.95 percent year-over-year in December, according to the latest Paychex | IHS Markit Small Business Employment Watch. Additionally, the Small Business Jobs Index which measures national employment growth for businesses with fewer than 50 workers remained unchanged from the previous month at 99.38.
"The Paychex | IHS Markit Small Business Jobs Index flattened in December, following nine-months of moderation. Additionally, small business hourly wage growth is starting to slow as the Fed takes measures to fight inflation," said James Diffley, chief regional economist at IHS Markit.
"Despite various headwinds including inflation, difficulties in staffing, and changing regulations, U.S. small businesses have continually proven to be innovative and resilient through the challenges presented to them since the start of the pandemic," said John Gibson, Paychex president and CEO. "As we enter 2023, small business owners and their employees are working more hours and finding ways to deal with inflation and higher credit costs."
In further detail, the December report showed:
- At 99.38, the December 2022 national jobs index was unchanged from the previous month and remains a full point higher than the monthly average during the year leading up to the pandemic (March 2019 - February 2020).
- Hourly earnings growth year-over-year slowed to 4.95 percent in December, its weakest level since March 2022.
- One-month annualized hourly earnings growth was below four percent for the third time during the past four months.
- At 0.48 percent, one-month annualized weekly hours worked growth was positive for the fourth consecutive month.
- Leisure and hospitality continue to rank first among sectors in hourly earnings growth (6.75 percent) and last in weekly hours worked growth (-0.52 percent).
- The jobs index in the South improved for the third consecutive month, increasing to 100.72. The South has led the pace of small business growth among regions for the past nine months.
- Tennessee improved 3.20 percent in 2022, representing the highest growth rate among states. Although Tennessee ranked last among states one year ago in December 2021, the state now ranks seventh at 100.34.
- Houston (102.75) and Dallas (102.08) have the two strongest jobs indexes among metros for the seventh consecutive month.
Paychex solutions reach 1 in 12 American private-sector employees, making the Small Business Employment Watch an industry benchmark. Drawing from the payroll data of approximately 350,000 Paychex clients with fewer than 50 employees, the monthly report offers analysis of national employment and wage trends, as well as examines regional, state, metro, and industry sector activity.
The complete results for December, including interactive charts detailing all data, are available at www.paychex.com/watch. Highlights are available below.
National Jobs Index
- At 99.38, the December 2022 national jobs index was unchanged from the previous month.
- The national jobs index slowed 1.54 percent during the past 12 months but has leveled off in recent months to end 2022.
National Wage Report
- Hourly earnings growth over the previous 12 months slowed to 4.95 percent in December, its weakest level since March 2022.
- One-month annualized weekly earnings growth was below four percent for the third time during the past four months.
- At 0.48 percent, one-month annualized weekly hours worked growth was positive for the fourth consecutive month. 12-month weekly hours worked growth (-0.27 percent) remains negative, however, for the 20th consecutive month.
Regional Jobs Index
- The jobs index in the South improved for the third consecutive month, increasing to 100.72. The South has led the pace of small business growth among regions for the past nine months.
- Ranked first among regions last December at 101.22, the West region slowed 2.52 percent during 2022 and now ranks lowest among regions at 98.67.
Regional Wage Report
- At 5.50 percent, the South is the only region with hourly earnings growth above five percent and has had the strongest rate for the past three quarters.
- The South has ranked first among regions in earnings growth and last in hours worked growth for the past quarter. Conversely, the Northeast has ranked last in earnings growth and first in hours worked growth for the past seven months.
- Weekly earnings growth in the West quickly slowed during the past two months to 4.48 percent in December. One-month annualized weekly earnings growth in the West was below two percent in both November and December.
State Jobs Index
- North Carolina (102.26) and Texas (101.96) continue to lead states in the rate of small business job growth by a wide margin in December.
- Tennessee's index (100.34) improved 3.20 percent in 2022, representing the highest growth rate among states. Tennessee ranked last among states in December 2021 and now ranks seventh at 100.34.
- West Coast states Washington (-3.03 percent) and California (-2.92 percent) have the weakest 12-month change rates among states.
- Of the twenty states analyzed, ten states increased and ten states decreased in December.
Note: Analysis is provided for the 20 largest states based on U.S. population.
State Wage Report
- Florida (6.44 percent) leads states in hourly earnings growth, followed by Missouri and Texas, which also have growth above six percent.
- Virginia (3.35 percent) ranks last among states in hourly earnings growth for the seventh consecutive month.
- Likely an impact of from Hurricane Ian, one-month annualized weekly hours worked growth spiked to 4.32 percent in Florida, the highest rate in more than two years. For context, Florida's result is two and half times higher than the next state, New Jersey at 1.73 percent.
Note: Analysis is provided for the 20 largest states based on U.S. population.
Metropolitan Jobs Index
- Houston (102.75) and Dallas (102.08) have the two strongest jobs indexes among metros for the seventh consecutive month.
- Riverside slowed 0.79 percent from last month and 4.48 percent from last year as its index fell to last place among metros (96.90).
- With the exception of a 0.02 percent uptick in September, Minneapolis slowed every month in 2022 for a total decline of 4.13 percent. Minneapolis closed 2021 with an index of 103.63 and 2022 with an index of 99.35.
Note: Analysis is provided for the 20 largest metro areas based on U.S. population.
Metropolitan Wage Report
- Miami tops metros in both hourly earnings growth (6.61 percent), as well as weekly earnings growth (6.27 percent).
- San Francisco (
$39.45 /hour) and Washington ($38.73 /hour) have the highest hourly rates among metros by a wide margin, but rank in the bottom three for growth in December. - Weekly earnings growth in Detroit slowed to 3.09 percent, weakest among metros. One-month weekly earnings annualized growth in Detroit fell to its lowest level since 2020, -1.76 percent.
- San Francisco is the only metro with positive weekly hours worked growth (0.04 percent).
Note: Analysis is provided for the 20 largest metro areas based on U.S. population.
Industry Jobs Index
- Despite falling 5.32 percent in 2022, the leisure and hospitality jobs index remains strong at 100.06 and improved slightly once again in December.
- Education and health services (100.09) trails only other services for the top-ranked index and also boasts the strongest one-month (0.18 percent) and 12-month (0.30 percent) change rates among sectors.
- The pace of small business job growth has been very consistent in the construction sector (98.41) as its index has been between 98 and 99 for 20 straight months.
Note: Analysis is provided for seven major industry sectors. Definitions of each industry sector can be found here. The other services (except public administration) industry category includes religious, civic, and social organizations, as well as personal services, including automotive and household repair, salons, dry cleaners, and other businesses.
Industry Wage Report
- Leisure and hospitality continue to rank first among sectors in hourly earnings growth (6.75 percent) and last in weekly hours worked growth (-0.52 percent).
- Leisure and hospitality was the only sector to report an increase in hourly earnings growth from November to December.
- At 4.08 percent, education and health services reported the weakest hourly earnings growth for the 15th consecutive month.
- Construction is the only sector with positive weekly hours worked growth (0.14 percent) and has ranked first among sectors since March 2022.
Note: Analysis is provided for seven major industry sectors. Definitions of each industry sector can be found here. The other services (except public administration) industry category includes religious, civic, and social organizations, as well as personal services, including automotive and household repair, salons, dry cleaners, and other businesses.
For more information about the Paychex | IHS Markit Small Business Employment Watch, visit www.paychex.com/watch and sign up to receive monthly Employment Watch alerts.
*Information regarding the professions included in the industry data can be found at the Bureau of Labor Statistics website.
The Paychex | IHS Markit Small Business Employment Watch is released each month by Paychex, Inc., a leading provider of integrated human capital management software solutions for human resources, payroll, benefits, and insurance services, and IHS Markit, a world leader in critical information, analytics, and expertise. Focused exclusively on small business with fewer than 50 employees, 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.
Paychex, Inc. (Nasdaq:PAYX) is a leading provider of integrated human capital management solutions for human resources, payroll, benefits, and insurance services. By combining innovative software-as-a-service technology and mobility platform with dedicated, personal service, Paychex empowers business owners to focus on the growth and management of their business. Backed by 50 years of industry expertise, Paychex serves more than 730,000 payroll clients as of May 31, 2022 in the U.S. and Europe, and pays one out of every 12 American private sector employees. Learn more about Paychex by visiting www.paychex.com and stay connected on Twitter and LinkedIn.
IHS Markit (NYSE: INFO) 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 percent of the Fortune Global 500 and the world's leading financial institutions. Headquartered in London, IHS Markit is committed to sustainable, profitable growth.
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Media Contacts
Chris Muller
Paychex, Inc.
+1 585-338-4346
cmuller@paychex.com
@Paychex
Kate Smith
IHS Markit
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katherine.smith@ihsmarkit.com
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