The pace of hiring, pay and hours worked decelerated last month, according to a report released Tuesday by payroll provider Paychex.
The
While small business job growth remains strong in the leisure and hospitality industry, the sector's growth rate dropped 0.73% in April and 4.41% from last year.
"It's still growing, but it slowed for the first time in 2023," said Frank Fiorille, vice president of risk management, compliance and data analytics at Paychex. "We saw a little bit of a trend change. The reason for that rate of decline was leisure and hospitality. That had pretty much been on fire for a very long time, growing pretty rapidly."
All regions of the country slowed in April with the West slowing the most (0.30%) to 98.73, the weakest among regions; at 100.53, the South led regions for the 13th consecutive month and remained the only region with an index above 100. Texas, Florida, Wisconsin and Tennessee all saw hourly earnings growth above 5.00% in April, outpacing the national average of 4.52%.
California had the weakest small business job growth rate among states for the third month in a row, dipping 3.03% from April of last year.
"California really sticks out with still slow growth in small business in California, specifically we're around the Bay Area of San Francisco," said Fiorille. "We've been seeing that for quite some time, but that is continuing to materialize."
Paychex also saw wage inflation slow to its lowest level since 2021, at 4.52%, which Fiorille attributed to the Federal Reserve's series of interest rate hikes since last year.
Paychex also released a
"Gen Z lost the most jobs during the pandemic, but it's really come back very strong now and surpassed the baby boomers from a workforce standpoint," said Fiorille. "Now one in every five small business employees are in Gen Z."
During this Small Business Week, and in the month ahead, accountants and their small-business clients should keep an eye out for debt ceiling negotiations in Congress as the Biden administration hopes to avoid a default on the nation's borrowing limit. After Treasury Secretary Janet Yellen warned that the U.S. could be reaching the limit on June 1, President Biden agreed Monday to reopen talks with House Speaker Kevin McCarthy, R-California. Last week, House Republicans passed the Limit, Save, Grow Act, which would impose steep spending cuts and repeal much of the extra funding for the Internal Revenue Service enforcement and green tax credits won by Democrats in the Inflation Reduction Act, in return for increasing the debt limit.
Biden has called for passing a "clean" debt limit increase and refused to negotiate over eliminating the administration's priorities, but has insisted that any spending cuts be part of budget negotiations, not debt limit talks. Budget talks could also open up discussion over several tax extenders that got left out of last December's omnibus spending bill, such as deferring a requirement from the Tax Cuts and Jobs Act on amortizing research and development costs over five years instead of writing them off in the first year, as well as the phaseout of bonus depreciation in 2023.
"The one I would call out is the budget and what happens with that, if it gets passed, or how it gets changed," said Fiorille. "There are several proposals on tax credits, whether it's the R&D or the bonus depreciation. If they can get those back in, I think it's really going to help small businesses."
