Paychex sees increase in wage growth, but slowdown in job growth in November
Hourly earnings growth increased 2.38 percent at small businesses in November, but job growth dipped 0.85 percent from a year ago, according to payroll giant Paychex.
The Paychex | IHS Markit Small Business Employment Watch for November indicated the tight labor market is making it difficult for many small businesses to find employees. The Small Business Jobs Index fell for the sixth month in a row, declining 0.11 percent from October to 99.01 in November. Despite the low rate of job growth, the rate of hourly wage growth increased slightly and is now at 2.38 percent ($0.63).
The top region for employment growth was the South, while for wage growth it was the West. In terms of states, Pennsylvania and Massachusetts are the weakest for small business job growth, while Arizona ranks at the top for wage growth. Dallas regained its top rank among metropolitan areas in terms of jobs growth, as did Riverside, California, in wage growth. In terms of industries, the construction industry hit a record high for hourly earnings growth at 3.31 percent. Hourly earnings growth in leisure and hospitality hit its highest level in 2018 and is up 4.02 percent from last year, continuing to show the strongest hourly gains among industries.
“We’ve seen the wage side pick up the last couple of months,” said Frank Fiorille, vice president of risk management, compliance, and data analytics at Paychex. “We pulled apart larger businesses versus smaller businesses. The wage growth in the larger businesses is definitely more robust and larger than it is for the smaller businesses. Our conclusion and theory there is that as the overall job market is very tight, I think employees are having their choice and many times they would go to a larger business than a smaller business based on probably having better benefits or other reasons. It’s an interesting dynamic we’re seeing now.”
Accountants can help their small business weather trends like year-end planning and the upcoming tax season in the wake of last year’s tax overhaul. “It’s always an interesting time right now when you go into the holiday season and there seems to be much more change going on,” said Fiorille. “My advice is to be aware and look around at the stuff that comes out this time of year or in January. There are W-4 changes coming down the road. Did they withhold enough? I’d also say for those that are in multiple states, states are rolling out their own regulations and changes at a very robust pace, so be aware of that. There are a lot of different things: paid sick leave, minimum wage, cybersecurity, retirement security. The states are doing a lot of their own stuff.”