Paychex sees small business hiring slow a bit in March

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Payroll giant Paychex reported a slight dip in small business hiring last month, while the pace of employment growth stayed relatively unchanged compared to last year.

The Paychex | IHS Small Business Jobs Index experienced a slight 0.05 percent decrease to 100.73 in March compared to February.

“The pace of job growth kind of peaked last June and dropped in the fall,” said Paychex president and CEO Martin Mucci. “But it has come back since the election, so we still think it’s a strong number and it’s been steady over the last four months, either increasing, or now flattened out this month, but it’s still a good strong growth number for small businesses.”

The East South Central part of the country led all the other regions for the fifth month in a row, while the West South Central region saw some improvement. Tennessee remained the top-ranked state for small business job growth, while Dallas became the top metropolitan area for small business jobs, after a 1.45 percent one-month decline in Atlanta, which held the top position in February.

“The Southeast is still the strongest,” said Mucci. “That includes the East South Central and South Atlantic. They’re still holding the top spots. The interesting thing this month might be that the Atlantic and Pacific regions have shown the least improvement over last year, and that holds the same way when you look at the states. California’s job growth is down about 0.8 percent from last year, and New York is down. California peaked in the 2015 timeframe and it’s dropped off. We think maybe some of this is that as people have moved in, jobs increased in 2015. But costs have started going up again, particularly in California. Then people started migrating away, and job growth started to pick up in the second-tier cities. Tennessee is strong from a state perspective, and Nashville is becoming more of a high-tech hub for jobs. Tennessee is gaining some of the loss from California because of the costs.”

The leisure and hospitality industry showed the best growth rates among industries, gaining 0.33 percent in March and 1.57 percent year over year. However, it still lagged behind “Other Services,” which includes various services such as pet care, hair care, lawn care, landscaping and painting.

“Leisure and hospitality is up pretty strong from our base year, like 4 percentage points of growth, and it’s the strongest over last year now,” said Mucci. “While Other Services is still at the top, leisure and hospitality—which includes restaurants and hotels—is picking up, particularly in the Northeast. Construction growth is down about 1 percent from last year. The only place construction is really stronger is in the South region, and that’s both commercial and residential.”

As uncertainty continues in Washington over tax reform and health care reform, Mucci sees a continuing role for accountants in advising their small business clients on how to plan ahead.

“I think accountants are being kept busy as important advisors on what’s happening in the administration,” said Mucci. “Health care was in and then out and now is back in, possibly. l think the important thing for accountants to advise their clients is to stick with the accountants to give them the latest on what they need to do to stay in compliance with these regulations, like the Affordable Care Act. All the filings still need to be done. That is still the law and people need to make sure they are adhering to all the laws that are out there. No matter what they hear in the press, I think it’s good to rely on your accountant to say what they should be doing here, what’s the law and the compliance requirements.”

He pointed to possible tax law changes, such as the recently reintroduced Mobile Workforce State Income Tax Simplification Act, which the American Institute of CPAs has long advocated for through multiple Congresses.

“It’s so complicated with how much time you spend in one state versus another,” said Mucci. “With this whole gig economy there are so many more employees traveling and doing part-time jobs all over.”

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