U.S. Small Businesses Continue to Show Moderate Job Growth and Wage Inflation Continues to Moderate

Rhea-AI Summary

Paychex Small Business Employment Watch reports a 3.42% year-over-year hourly earnings growth for U.S. workers in February, with a national Small Business Jobs Index of 100.67, indicating steady job growth. However, the index remains below pre-pandemic levels for two consecutive months, with the West region dropping below 100 for the first time since March 2021.

Insights

Economist

The moderation of year-over-year hourly earnings growth to 3.42% suggests a potential cooling in wage inflation, which may influence the Federal Reserve's monetary policy decisions. A steady job growth index, such as the one reported at 100.67, indicates relative stability in the small business employment sector. However, the fact that it remains below pre-pandemic levels could signal a longer-term structural shift in the labor market, possibly due to changes in business operations, the adoption of technology, or shifts in consumer behavior. The regional discrepancy highlighted, with the West falling below 100, could be indicative of localized economic pressures or industry-specific challenges that may warrant targeted policy responses.

Market Research Analyst

The Paychex Small Business Employment Watch provides valuable insights into the small business sector, a significant contributor to the U.S. economy. The report's findings, particularly the steady job growth index, could be reassuring to investors concerned about economic stability. However, the slowing wage growth may reflect a cautious approach from businesses amidst economic uncertainties. This could impact consumer spending and, in turn, affect companies that rely heavily on domestic markets. The decline in one major region below the index baseline suggests a need for businesses to adapt their strategies to regional economic conditions, which could involve reassessing their market presence or investment plans.

Financial Analyst

From a financial perspective, the moderation in wage growth may alleviate some pressure on small business margins, which could be positive for profitability in the short term. However, the reported trend of wages and job growth needs to be monitored for potential implications on the broader stock market. Slower wage growth could translate to less disposable income and potentially softer revenue growth for consumer-facing businesses. On the other hand, a steady job growth index suggests a resilient labor market, which could support a stable consumer base. Investors might look at sectors that could benefit from these trends, such as technology or automation, which may become more attractive as businesses seek efficiency in a tighter labor market.

ROCHESTER, N.Y.--(BUSINESS WIRE)-- According to the Paychex Small Business Employment Watch, year-over-year hourly earnings growth for U.S. workers moderated to 3.42% in February, continuing a trend that began mid-2022. Small business job growth held steady from last month, with the national Small Business Jobs Index closing February at 100.67.

The February Paychex Small Business Employment Watch showed hourly earnings growth for U.S. workers at 3.42% and a national jobs index of 100.67. (Graphic: Business Wire)

“While our index continues to show job growth in businesses with fewer than 50 workers, it has now remained below pre-pandemic levels for two months. For the first time since March 2021, a major region has fallen below 100 (West: 99.81),” says John Gibson, Paychex president and CEO. “A tight job market for qualified candidates, access to affordable growth capital, and concerns about inflation continue to constrain small business owners from reaching their full growth potential.”

“Wage growth for small business workers continues to moderate, most notably for weekly earnings in Leisure and Hospitality. The sector fell below three percent (2.58%) for the first time since January of 2021 and is down from a peak of 10.35%,” adds Gibson.

Jobs Index and Wage Data Highlights:

• The national index for February (100.67) continued to show slow and steady growth, down just 0.26 percentage points since July 2023.
• National hourly earnings growth moderated to 3.42% year-over-year, continuing a measured deceleration that began in May 2022.
• The West (3.87%) led regional hourly earnings growth for the ninth month in a row, and job growth fell below 100 for the first time since March 2021.
• The South reported the weakest hourly earnings growth (3.11%) among regions in February. It remained the strongest region for small business employment growth (101.35), a designation it has held for 17 of the last 18 months.
• Small business job gains in Leisure and Hospitality (100.24) continue to level off after pandemic surges, down 0.35 percentage points from last month and 5.09 percentage points from last year.

The complete Small Business Employment Watch results for February 2024, including interactive charts detailing the data at a national, regional, state, metro, and industry sector level are available at www.paychex.com/watch. Learn more and sign up to receive monthly Employment Watch alerts.

About the Paychex Small Business Employment Watch

The Paychex Small Business Employment Watch is released each month by Paychex, Inc. Focused exclusively on businesses with less than 50 workers, 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 industry benchmark delivers real-time insights into the small business trends driving the U.S. economy.

About Paychex

Paychex, Inc. (Nasdaq: PAYX) is an industry-leading HCM company delivering a full suite of technology and advisory services in human resources, employee benefit solutions, insurance, and payroll. The company serves approximately 740,000 customers in the U.S. and Europe and pays one out of every 12 American private sector employees. The more than 16,000 people at Paychex are committed to helping businesses succeed and building thriving communities where they work and live. Visit paychex.com to learn more.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240305447706/en/

Media Contacts

Tracy Volkmann

Paychex, Inc.

(585) 387-6705

tvolkman@paychex.com

@Paychex

Colleen Bennis

Matter Communications

Account Director

(585) 666-9510

cbennis@matternow.com

Source: Paychex, Inc.

FAQ

What was the year-over-year hourly earnings growth for U.S. workers in February according to the Paychex Small Business Employment Watch?

The year-over-year hourly earnings growth for U.S. workers in February was 3.42% according to the Paychex Small Business Employment Watch.

What was the national Small Business Jobs Index in February according to the Paychex Small Business Employment Watch?

The national Small Business Jobs Index in February was 100.67 according to the Paychex Small Business Employment Watch.

How long has the job growth remained below pre-pandemic levels according to the Paychex Small Business Employment Watch?

The job growth has remained below pre-pandemic levels for two months according to the Paychex Small Business Employment Watch.

Which region fell below 100 in the Small Business Jobs Index for the first time since March 2021 according to the Paychex Small Business Employment Watch?

The West region fell below 100 in the Small Business Jobs Index for the first time since March 2021 according to the Paychex Small Business Employment Watch.