Small business work hours grew in July

Growth in the number of weekly hours worked at small businesses hit its highest level in over five years last month, according to a new report from payroll provider Paychex.

The Paychex Small Business Employment Watch for July found that weekly hours worked growth reached 0.40%, its highest level since April 2021 (0.44%), while weekly earnings growth rose to 3.14%, its strongest level since December 2023 (3.25%). However, hourly earnings growth for small business workers remained below 3% at 2.86% in July. 

Paychex saw gains in the number of weekly hours worked over the past five months at small businesses with fewer than 50 employees.

"That's one of the levers that small businesses can pull when things are starting to get better," said Frank Fiorille, vice president of risk management, compliance and data analytics at Paychex. "They can either go and get temp help or ask their folks to work more hours. Then the next thing is they'll hire a new person, so we're really hopeful that in the next few months you're going to see hiring tick up because they're asking people to work more hours. It's a predictor of things to come and something to really watch. That has been creeping up until this month we saw a nice jump up to the highest level in five years."

Nevertheless, he advised accountants to keep an eye on artificial intelligence regulations and legislation and how they will affect hiring at small businesses. 

The top three states for weekly hours growth in July — Ohio (0.70%), Tennessee (0.63%) and North Carolina (0.57%) — all reported one-month annualized growth above 2%.

Indiana (4.47%) and Tennessee (4.32%) ranked in first and second place among states, respectively, for hourly earnings growth in July. All states reported hourly and weekly earnings growth above 2% in July, with Georgia the weakest for hourly earnings growth at 2.11%.

After gains in four of the past five months, Paychex's national Small Business Jobs Index is up slightly (0.07 percentage points) during this past quarter. Among the various industries for job growth in July, manufacturing (99.34) recorded the strongest one-month change (0.35 points), three-month change (1.14 percentage points) and 12-month change (0.72 points) among the different sectors.

Pennsylvania topped the state jobs index rankings in July for the first time since August 2022 and only the second time since reporting began in 2014. Arizona ranked second in July. Small business job growth has been volatile in Tennessee in recent months as the state ranked first in May but decelerated to last place in July, ranking just ahead of Missouri.