Small businesses raised wages to new high in November, says Paychex

Hourly earnings grew 3.11 percent among employees of small businesses in November, the highest level since reporting began in 2011 for payroll giant Paychex.

The latest Paychex | IHS Markit Small Business Employment Watch also found weekly earnings were continuing to grow on average at small businesses, accelerating 3.75 percent in November. Thanks to the tight labor market, the national jobs index moderated slightly by 0.03 percent, but stayed above 98.

“Wages continue to increase and probably accelerated this past month,” said Frank Fiorille, vice president of risk management, compliance and data analytics at Paychex. “When you dig down into that wage growth, we’ve seen really strong wage growth mostly in the lowest quintile, the group that’s been lifted by minimum wage increases in various states and cities. But what’s changed now is that we’re starting to see wages rise across the board. Hours worked also jumped. It’s still a very tight labor market, and it’s difficult to find, attract and keep employees. Employers have to start to pay them more and they work longer hours. That ties in well with our employment index. That growth seems to be decelerating slightly or is flattish month to month.”

The South continued to lead the way in regional small-business employment growth, while the West retained its lead among regions in wage growth. Tennessee remained in first place among the states in terms of small-business job growth, while New York led the way among states on wage growth. Dallas was again the top metropolitan area for small-business job growth, while three California metro areas — Los Angeles, San Francisco and San Diego — led on hourly earnings growth.

“On wages, it’s definitely the East and West Coasts where we’re seeing robust wage increases, but the South has better job growth,” said Fiorille. “There are big increases on the wage side in San Francisco, and many metros in California that are seeing 4 and 5 percent on a monthly basis, as is New York. In Texas, Dallas has been the leader for a long time in employment growth.”

On an industry sector basis, leisure and hospitality led all the other sectors in terms of hourly earnings growth. There was little change in employment growth rates among industries in November, although manufacturing and the combined trade, transportation and utilities sector had the strongest gains from the previous month.