- Key insight: The real reason small businesses are raising existing employee pay over new hire pay.
- What's at stake: Job-seekers looking for competitive starting salaries as employers shift their wage strategies.
- Forward look: Get ready for small businesses to continue growing slightly into the year's end.
Private sector employment grew by 90,000 jobs this month, payroll giant ADP
More specifically, the base pay for those who stayed in their jobs rose 3.0% year over year; while base pay for those who changed jobs increased 4.8%. Gross pay for job-stayers rose 4.4% year over year, while gross pay for job-changers increased 7.3%. The pay gains for professional and business services averaged 3.2%.
The service-providing sector added 59,000 jobs in September, but professional and business services such as accounting and tax preparation lost 11,000 jobs, as did financial activities such as banking, which shed 16,000 jobs. However, those job losses were more than offset by gains in other industries such as education and health services, which together added 55,000 jobs, and leisure and hospitality, which added 22,000 jobs. The goods-producing sector added 31,000 jobs for the month, bolstered by 17,000 jobs added in manufacturing and 15,000 in construction.
Small businesses with between one and 19 employees added 18,000 jobs in September, while those with between 20 and 49 employees added 5,000 jobs. Midsized businesses with between 50 and 249 employees added 18,000 jobs in September, while those with between 250 and 499 employees gained 36,000 jobs. Large companies with 500 employees or more added 14,000 jobs. The August total number of jobs added was revised downward by ADP and Stanford Digital Economy Lab from 38,000 to 36,000.
"All in all, some nudges up in pay pressure that we're seeing and a rebound in job gains," said ADP chief economist Nela Richardson during a conference call Wednesday with reporters. "Overall, a strong report. We're going to be watching both pay and wages and how they're feeding into the rest of the economy."
Other small business reports
Separately on Tuesday, another payroll processor, Paychex, released its monthly
Hourly earnings growth (2.78%) moderated slightly in September as one-month annualized growth (2.41%) slowed to its lowest level in nearly six years since October 2020.
Weekly earnings growth increased to 3.07% in September, the ninth month in a row of growth. Weekly hours worked growth (0.21%) was positive for the seventh month in a row.
The Midwest remained the top region for small business employment growth. Arizona was in first place among the states for small business job growth. Phoenix led the U.S. metropolitan areas for job growth in September.
Education and health services remained the top sector for small business job growth in September and has ranked among the top two sectors every month since February 2023.
"The small business labor market continues to demonstrate remarkable stability," said Paychex president and CEO John Gibson in a statement. "Our data shows businesses are largely maintaining staffing levels. The pace of employment growth across our overall client base improved slightly in September, with stronger growth among businesses with more than 50 employees. Sustained increases in weekly earnings and hours worked growth demonstrate that businesses continue to meet operational needs without increasing hiring. With hourly earnings growth remaining below three percent for more than two years, labor cost pressures have become more manageable. These trends point to a labor market that remains fundamentally solid."
Another payroll company, Gusto, also released its
"While hiring remains concentrated in health care and social assistance, hiring persisted in nearly all sectors (14 out of 19) and across all small business size bands," Gusto said in an email. "Despite continued questions about the current and future state of the U.S. economy, small businesses are not only maintaining their payrolls but are growing slightly going into the end of the year."
Wages have increased 4% from last year, above the most recent 3.4% inflation rate. Small businesses have increased new hire pay by 3.1% compared to a year ago and below inflation, compared to a 4% increase for existing employees, suggesting that businesses are focusing more on retaining their current employees than on competing for new employees.
Introductory bullet points created by AI with editorial review.
