Wage Growth for U.S. Small Business Employees Remains Consistent in July, While Job Growth Continues to Moderate

Rhea-AI Summary

The Paychex Small Business Employment Watch reports that hourly earnings growth for U.S. workers in businesses with fewer than 50 employees remained steady at 3.16% in July 2024. Weekly earnings growth has been below 3% for six consecutive months. The Small Business Jobs Index shows moderate gains in the first seven months of 2024, with a July reading of 99.87.

Key highlights include:

• Midwest region leads in small business employment growth
• Construction sector leads in earnings growth but shows a decline in job growth
• Weekly hours worked growth remains negative for the 16th consecutive month
• Education and Health Services tops industry employment growth but has the weakest hourly earnings growth

Small businesses continue to face challenges in hiring due to a tight labor market, inflationary pressures, and evolving regulations.

Positive

• Hourly earnings growth remains steady at 3.16% for small business employees
• Moderate employment gains averaged 100.44 through seven months of 2024
• Majority of states report an index level above 100 in July
• Construction sector leads in hourly earnings (3.84%), weekly earnings (3.79%), and weekly hours worked (0.16%) growth
• Education and Health Services tops industry employment growth with an index of 102.04

Negative

• Weekly earnings growth remains below 3% for six consecutive months
• National small business jobs index declined to 99.87 in July
• Weekly hours worked growth negative for 16th consecutive month (-0.20%)
• California's employment growth dropped to 98.74, indicating significant year-over-year job losses
• Construction sector experienced largest one-month decline in job growth, down 0.67 percentage points

Insights

Labor Market Analyst

The Paychex Small Business Employment Watch for July 2024 reveals a complex landscape for small businesses in the U.S. While hourly earnings growth has remained steady at 3.16% since May, weekly earnings growth continues to lag below 3% for the sixth consecutive month. This suggests a delicate balance between wage pressures and economic uncertainties.

The moderate job growth reported in the first seven months of 2024, with a Small Business Jobs Index averaging 100.44, indicates a resilient but cautious small business sector. However, the July reading of 99.87 hints at a potential slowdown. This could be attributed to the tight labor market and inflationary pressures mentioned by Paychex CEO John Gibson.

Notably, regional disparities are emerging:

• The Midwest is showing the strongest job growth, with Indiana, Michigan, Missouri and Ohio leading the pack.
• California's employment growth has declined further to 98.74, signaling more significant year-over-year job losses.
• The Construction sector, while still leading in earnings growth, has experienced the largest one-month decline in employment.

The persistent negative growth in weekly hours worked (-0.20%) for 16 consecutive months suggests that small businesses are carefully managing labor costs, possibly in response to economic pressures. This trend, combined with the moderate wage growth, indicates that small businesses are navigating a challenging environment, balancing the need to attract talent with financial constraints.

Economic Policy Analyst

The July 2024 Paychex Small Business Employment Watch offers valuable insights into the current state of the U.S. small business economy. The data presents a nuanced picture of resilience amidst challenges, with several key implications for economic policy:

1. Wage Growth Stability: The consistent 3.16% hourly earnings growth since May suggests that wage pressures have stabilized. This could indicate that the Federal Reserve's efforts to control inflation are having some effect, potentially influencing future monetary policy decisions.

2. Regional Disparities: The strong performance of Midwest states in job growth, contrasted with California's decline, highlights the need for targeted regional economic policies. Policymakers may need to consider state-specific interventions to address these disparities.

3. Sector-Specific Trends: The Construction sector's decline in employment growth, despite leading in earnings growth, warrants attention. This could be an early indicator of a slowdown in the housing market or infrastructure projects, which might require sector-specific support measures.

4. Labor Market Dynamics: The continued negative growth in weekly hours worked (-0.20%) for 16 months straight suggests that small businesses are adopting more flexible work arrangements or are cautious about committing to full-time positions. This trend may necessitate policy adjustments in areas such as part-time worker benefits or gig economy regulations.

These trends underscore the need for policymakers to maintain a flexible approach, balancing inflation control with support for small business growth and employment. The data also highlights the importance of monitoring regional and sector-specific trends to craft more targeted and effective economic policies.

ROCHESTER, N.Y.--(BUSINESS WIRE)-- According to the Paychex Small Business Employment Watch, hourly earnings growth for U.S. workers in businesses with fewer than 50 employees has held steady since May, reporting 3.16% growth in July, and weekly earnings growth remains below three percent for the sixth consecutive month. The Small Business Jobs Index has reported moderate gains on average through the first seven months of 2024.

The Paychex Small Business Employment Watch shows 3.16% hourly earnings growth in July as job growth continues to moderate. (Graphic: Business Wire)

“Overall, small businesses are looking to hire but continue to face a tight labor market,” says John Gibson, Paychex president and CEO. “Inflationary pressures and an evolving regulatory environment are making it difficult for these organizations to compete for scarce qualified employees. While job growth has moderated compared to last year, small businesses continue to be resilient and are finding ways to navigate the changing economic environment.”

“Hiring dynamics by region, state, and industry are diverging, with the strongest job growth happening in the Midwest and a notable slowdown in Construction hiring across the country,” Gibson adds. “Small businesses are also continuing to carefully manage hours worked, which remains negative year-over-year for the 16th-straight month.”

Jobs Index and Wage Data Highlights:

• The national small business jobs index has averaged moderate employment gains (100.44) through seven months of 2024. The July reading stands at 99.87.
• The majority of states are reporting an index level above 100 in July, but others are driving the national index to trend down.
  • The top four states for small business employment growth in July are all located in the Midwest region (Indiana, Michigan, Missouri, and Ohio).
  • Employment growth in California dropped again in July to 98.74 indicating more significant year-over-year job losses.
• At 2.87%, weekly earnings growth has trended just below three percent for the past six months. Weekly hours worked growth (-0.20%) remains negative year-over-year for the 16th consecutive month.
• The Construction sector has the largest one-month change among industries, down 0.67 percentage points to an index level of 99.77 in July, yet it continues to lead growth among sectors in hourly earnings (3.84%), weekly earnings (3.79%), and weekly hours worked (0.16%) for the ninth consecutive month.
• Education and Health Services (102.04) remains the top industry for small business employment growth in July yet reports the weakest hourly earnings growth at 2.67%.

The complete Small Business Employment Watch results for July 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 fewer than 50 workers, the monthly report offers analysis of national employment and wage trends and 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. The jobs index is scaled to 100, which represents no year-over-year change in job growth among same store businesses. Index values above 100 represent new jobs being added, while values below 100 represent jobs being lost.

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 over 745,000 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/20240730370165/en/

Media

Tracy Volkmann

Paychex, Inc.

Manager, Public Relations

(585) 387-6705

tvolkman@paychex.com

@Paychex

Source: Paychex, Inc.

FAQ

What was the hourly earnings growth rate for small business employees in July 2024 according to Paychex PAYX?

According to the Paychex Small Business Employment Watch, hourly earnings growth for U.S. workers in businesses with fewer than 50 employees was 3.16% in July 2024.

How has weekly earnings growth for small businesses trended in recent months as reported by Paychex PAYX?

Weekly earnings growth has remained below 3% for six consecutive months, with July 2024 reporting 2.87% growth according to Paychex.

Which region led small business employment growth in July 2024 based on the Paychex PAYX report?

The Midwest region led small business employment growth in July 2024, with the top four states (Indiana, Michigan, Missouri, and Ohio) all located in this region.

What was the trend in weekly hours worked for small businesses as of July 2024 according to Paychex PAYX?

Weekly hours worked growth remained negative (-0.20%) year-over-year for the 16th consecutive month as of July 2024.

Which industry sector showed the strongest employment growth for small businesses in July 2024 based on the Paychex PAYX report?

Education and Health Services showed the strongest employment growth for small businesses with an index of 102.04 in July 2024.