Paychex Sees Small Business Employment Growth Slowing

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The pace of small business hiring appears to be leveling off, according to a new report from payroll giant Paychex and the research firm IHS.

The Paychex | IHS Small Business Jobs Index decreased 0.17 percent in May, bringing the national index to 100.65. Year over year the national index declined 0.49 percent. Moderating from last month, the drop in the national index brought the three-month growth rate to negative 0.18 percent.

“May’s index seems to be in line with a lot of the other economic indicators that we’re seeing with the recovery,” Paychex CEO Martin Mucci told Accounting Today. “It’s moderate. There’s still growth over our base year from an employment perspective for small businesses, but it’s somewhat inconsistent growth. We had some gains in the early part of the year. It flattened out the last couple of months and then dropped a little in May, so we’re not seeing that strong recovery.”

The East North Central region surpassed the West North Central to become the top-ranked regional index for Paychex and IHS. Indiana regained the lead among states tracked by the index with the best one-month and 12-month growth rates. Among the metropolitan areas measured by the index, Dallas continued to lead, while Washington, D.C., showed the most improvement.

“We saw a general weakness where it kind of dropped off in all regions across the country,” said Mucci. “The strongest parts of the country are still the Central regions, and you’re seeing the strongest growth in Indiana and Washington State. There’s still some in California as well.”

The pace of construction industry hiring has declined a bit, he noted, but hiring in that industry is still growing in California, Florida and some other Southern states, which could offer opportunities for accountants advising small businesses.

“I think that’s around housing, of course, and probably single-family as well as rental units,” Mucci added. “We’re also seeing what we call ‘other services’ employment growth. That’s discretionary services, anything from dry cleaning to pet care, things like that. I think as gas prices drop, people have a little spending money and they’re spending it on discretionary services. Hopefully the accounting community will see some pickup in those small businesses.”

Paychex doesn’t specifically track hiring in accounting firms, although Mucci noted that it falls under the financial services sector, which is continuing to add jobs and grew a bit in the early part of this year.

The Paychex | IHS Small Business Jobs Index does not provide a predictive model for hiring, but Mucci nevertheless anticipates some growth in part-time hiring this summer. “Part-time workers overall have gotten up to almost 8 percent of the workforce, which is about a percent and a half growth from last year,” he said. “So part-time workers are actually picking up, and I think you will see that in the summer. While we don’t predict with this model, I would assume that it will continue to be moderate growth through the summer, and I would expect that to continue. Consumer confidence is up a little bit, and small business optimism is up a little bit, when you look at those indicators, so that should bode well for the summer.”

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