Paychex Sees Growth in Small Business Jobs in August

Small businesses continued to add jobs in August at roughly the same pace as July, according to the latest figures from Paychex.

The Paychex | IHS Small Business Jobs Index, which the payroll giant compiles with the research firm IHS, grew slightly in August by 0.02 percent. At 100.70, the national index increased 0.22 percent from a year ago.

“August was about flat to July, but that’s still a 0.22 percent increase over a year ago,” said Paychex president and CEO Martin Mucci. “Year to date the pace of job growth is up about 0.33 percent in 2016.”

The Mountain region led the way among parts of the U.S., pushing the South Atlantic to the No. 2 spot. Washington State continued to top other states, with an index level of 104.30, while California declined 0.82 percent compared to a year ago, nearing a five-year low.

“It is a tale of two coasts, meaning the East Coast is really showing the best growth rate now,” said Mucci. “From the Northeast down to the South Atlantic, they’re having the best job growth rate. Most of their job growth rates have increased about a percent over last year. Yet the Pacific Region, really California, has been down about 0.7 percent from last year. The issue with California, I think, is they recovered faster out of the recession, and their job growth rate peaked around 2014. They’re at kind of a five-year low right now in many of the major cities in California. From a state perspective, Washington State continues to hold the top spot, but the rest of the top five are all in the South Atlantic. They’re Georgia, Florida, North Carolina, and even Virginia, which has seen some pretty strong growth in the last year for small business, around security and defense spinoffs from government jobs.”

Seattle increased its lead among metropolitan areas, showing the strongest one-month gain in August of 0.92 percent. There was little movement among the various industries in August, although the manufacturing industry continues to struggle, declining 0.85 percent in comparison to a year ago.

Mucci believes accountants can help their small business clients grow, especially in those parts of the country with the most job growth and in industries that cater to discretionary spending, such as personal care, which continues to see strong job growth month after month. One of the areas where small businesses will need help is the Labor Department’s new overtime rule, which takes effect in December, enabling millions more workers across the country to qualify for overtime pay. Minimum wage laws have also been changing in several states and cities in recent years.

“What we’re finding in our surveys is that the vast majority of small businesses are not aware of these overtime rules or of paying attention to the minimum wage changes,” said Mucci. “I think accountants could play a great role in keeping them away from being in a penalty situation.”

Thanks in part to the minimum wage increases, average wages overall are picking up. “We do see wages in small businesses up about 3.7 to 3.8 percent over last year, so it’s a pretty healthy increase,” said Mucci.

One exception was New Jersey Governor Chris Christie’s veto Tuesday of a minimum wage increase to $15 per hour. Christie refused to follow the lead of New York State and California, which raised their minimum wages to $15 per hour this year. New Jersey already allows for more modest minimum wage increases pegged to the consumer price index and now stands at $8.38.

“We haven’t seen it vetoed too many times,” said Mucci. “It’s been pretty much supported from the federal right across to the states to some cities. Even some cities like Seattle have made it a requirement. That’s actually a little bit of an exception, at least from what we’ve seen in the last few months.”

Small business startups have also been growing in recent years thanks to the economic recovery. “Based on the Small Business Administration numbers, the number of new small business startups is certainly back to pre-recession levels,” said Mucci.

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