Small-biz hiring slows, but pay grows

The pace of small-business job growth slackened in April, but hourly earnings ticked up to 3.34% for the month, ending a nearly two-year slowdown, according to payroll processor Paychex.

The Paychex Small Business Employment Watch found that growth in weekly hours worked for employees also slowed for the 13th month in a row, down -0.41% in April. Paychex's national jobs index showed positive job gains in April, but at 100.12, it's down 1.06 points from last year's 101.18 mark.

"The growth has definitely been slowing over the past few months," said Frank Fiorille, vice president of risk, compliance and data analytics at Paychex. "It's right at that 100 number, so there's a little bit of softness in that job growth. Small businesses are still having a hard time finding employees to work."

Hourly earnings growth increased to 3.34% in April, indicating the end of a steady deceleration that began mid-2022. However, as weekly hours worked growth (-0.41%) remains in negative territory year-over-year, weekly earnings growth again fell below 3% in April to 2.88%.

The West (3.75%) led the way on regional hourly earnings growth for the 11th consecutive month. Washington (4.91%) and Seattle (5.11%) topped the various states and metropolitan areas, respectively, in terms of hourly earnings growth among U.S. small-business workers.

"The South continues to outperform other regions as far as job growth," said Fiorille. "We continue to see wage growth on the West Coast. That's a little bit of a change in trends. For a very long time, we saw California at the bottom for job growth. We think a lot of it has to do with regulation, and that is starting to change a little bit. They're starting to come back, but they're still pretty negative."

He advised accountants to be aware of recent changes in federal regulations such as the fiduciary rule, overtime and noncompete agreements. "There's a lot of stuff coming out from a regulation standpoint," said Fiorille. However, he expects few changes on the tax side for now with tax legislation currently stalled in the Senate.