Paychex reported some softening in employment growth among small businesses last month.

The Paychex | IHS Small Business Jobs Index, which the payroll giant produces with the research firm HIS, decreased slightly in September, moving from 100.48 to 100.44.

After increasing through the first quarter of 2015, the pace of employment growth has moderated during the second and third quarters of 2015, Paychex noted. The Mountain region was the top-performing regional index. Texas surpassed Washington and Georgia to lead among states tracked by the index, while Dallas continues as the top-ranked metro area for the twelfth straight month. Other Services (except Public Administration)*, as defined by the Bureau of Labor Statistics, ranked as the top industry sector for small business employment growth at 103.95.

The Small Business Jobs Index has expanded this month to include reporting on eight major industry sectors. In addition, the index for each region, state, metropolitan area and industry is now being reported using a national baseline to enable users to better compare employment activity on a relative basis across all categories. Details on the updated methodology can be found in the “Understanding the Index” section of Paychex’s Small Business Jobs Index site.

“The big thing we’ve added is industry sector reporting,” said Paychex president and CEO Martin Mucci. “Not only do we show where the job growth is across the nation and then by area, but now we’re adding where the strongest employment growth is by job sector. This month, for example, the ‘Other Services’ sector has the highest index. That includes discretionary services—things like personal care and pet care. Construction was next, and then leisure and hospitality jobs. Many of those represent discretionary income. With gas prices down, you’ve got a little bit more discretionary income, and that has driven people to pay for more things like discretionary personal services.”

Mucci noted there has also been an increase in part-time employment, which has grown 2.5 percent over the past two years and could lead to more demand for accountants to help small businesses keep track of time and attendance.

The Other Services (except Public Administration) sector was the top industry on the Paychex IHS index at 103.95, with solid one-month gains of 0.41 percent in September and 1.34 percent over the past 12 months. The leisure and hospitality industry surged 0.44 percent from August to September, improving to an index level of 100.68. After a tough second half of 2014, the leisure and hospitality sector has steadily increased the pace of employment growth during the first three quarters of 2015. Following low oil prices and the high value of the dollar, the manufacturing sector dropped the most over the last year, 1.20 percent. At 99.32, manufacturing is the lowest industry index and is trending at levels not seen since 2010. The construction industry is doing relatively better.

“Construction, even though it’s down a little bit in the last 12 months, it’s still a pretty strong employment growth,” said Mucci. “That’s because new home sales are up about 22 percent, and they’re at a seven-year high, so you’re seeing more new homes being built.”

Professional and business services went a little bit lower in the index, despite some positive job growth. Manufacturing was at the bottom, in part due to the strength of the U.S. dollar. “There are a lot of regulations right now that are hitting small businesses,” said Mucci.  “Between the Affordable Care Act, overtime rules that look like they will go into effect next year, and minimum wage changes, there’s a lot of things going on that may drive employers to go more part time than full time and to be a little bit more careful in who they’re hiring and what costs they’re taking on with their new employees.”


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