Paychex reported growth in small business jobs on its monthly index, in a positive sign for the start of the year.

The Paychex | IHS Small Business Jobs Index, which the payroll company produces in association with the research firm IHS Markit, reached 100.62 in January, beginning 2017 at the same pace of employment growth it averaged last year. The national index rose 0.13 percent in January after growing 0.10 percent the previous month, the first two-month increase since last February, as employment improved 0.21 percent during the past quarter.

“This is the second month in a row that we’ve seen improvement,” said Paychex president and CEO Martin Mucci. “It gets us back to the average level for 2016 for a small business job growth rate. We peaked last June, and then decreased through the fall as the election approached. Now in the last two months we’ve seen it rebound and improve from the index perspective, so we’re seeing a little bit of a pickup in small business job hiring.”

Most regions of the country saw increases in small business jobs in January, apart from the South Atlantic region, which experienced a slight decrease of 0.09 percent. Four of the top five states saw their index levels decrease in January, but nine of the bottom 10 states improved on the index. At 104.17, Tennessee had the strongest index level and growth rate among the states. In terms of cities, Atlanta, Seattle and Dallas topped the rankings for metropolitan areas. Among industry sectors, the Other Services sector, which mainly involves discretionary services such as pet care, outpaced other industry sectors. Some higher-paying sectors, such as professional and business services, financial activities, and manufacturing industries, fell below the 100 level on the index at the start of the year.

Paychex Small Business Jobs Index January 2017

Mucci pointed to similar trends in the National Federation of Independent Business’s monthly survey on small business optimism, which hit a 12-year high in December in the wake of the election, and the Conference Board’s Consumer Confidence Index, which hit a 15-year high in December but then declined a bit last month.

“Both are almost at the highest point they’ve been in 10 years or so, so we’re seeing lots of optimism, but we’ll have to hope that we see this continue and actually translate into more jobs,” said Mucci.

He believes small businesses are heartened by the Trump administration’s promises to roll back federal regulations and implement tax reforms. President Trump signed an executive order Monday requiring federal agencies to withdraw two regulations for each new one they propose.

“When you think about small businesses, they’ve been really choked by the number of regulations, and that’s a very positive sign for them,” said Mucci. “Some small businesses will be impacted by tax reform, if it includes not being able to deduct imports, and others will benefit. We’ll have to see how that shakes out from a total jobs perspective.”

So far, he hasn’t heard much feedback on the new leader of the Small Business Administration, Linda McMahon, the former head of the pro wrestling company WWE. But in general Mucci is seeing more optimism among the small businesses he works with at Paychex. He believes accountants will be busy advising their clients on what to do about the changes expected this year with regulations, taxes and other matters, including the anticipated repeal of the Affordable Care Act, to be replaced by an as yet unknown health care law.

“Not only are you going to see a number of federal regulations and rules changed or repealed, but we’re already seeing a number of states start moving forward and initiating their own rules on the state-level,” he said. With the Obama administration blocked last year from implementing the overtime rule that was supposed to extend overtime pay to millions more workers, some states are enacting their own overtime protections and raising the minimum wage.

“I think accountants are going to be very busy sorting out for their clients the changes, maybe in reduced regulation from the federal government, but possibly much increased regulations and changes from the state government, which can be even more confusing for their clients,” said Mucci. “I think it’s going to be a very good year for accountants. They’ll be very busy.”

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Michael Cohn

Michael Cohn

Michael Cohn, editor-in-chief of AccountingToday.com, has been covering business and technology for a variety of publications since 1985.