Wage and hiring growth slowed at small businesses in November

Small businesses saw little change in their month-over-month hiring rates and hourly earnings growth, but the number of hours worked by employees rose, according to payroll giant Paychex.

The November 2022 Paychex | IHS Markit Small Business Employment Watch found the three-month average of hours worked by small businesses reached its highest level since March 2021, increasing to 0.77% in November. After eight consecutive increases, weekly earnings growth slowed slightly to 4.84%. The leisure and hospitality industry ranked in first place among sectors in hourly earnings growth at 6.38%, but in last place in terms of weekly hours worked growth, at -0.66%. Hiring in the construction industry increased 0.37% in November, which represented the best one-month growth rate among the various industries and its highest increase since April 2021. 

"You're hearing a lot about the layoffs at the big tech firms and the enterprise companies, but in this barometer of small and medium-size companies, the mom-and-pop and Main Street businesses, we're not seeing that," said Frank Fiorille, vice president of risk, compliance at data analytics at Paychex. "The growth in hiring has slowed this year. It's still significant but has slowed month to month. That growth slowed the most since March. We're seeing that again level off. But even though there are a lot of headwinds from inflation, it looks like small businesses are doing OK."

While October was a relatively rocky one for small businesses, the numbers bounced back somewhat in November. Wage growth year over year was nearly 5% this month, but not as high as the double-digit growth seen earlier this year. "That has been coming off the boil, but it's still still strong at 5%, though it doesn't seem to be accelerating, and has slowed a little bit," said Fiorille. 

The leisure and hospitality industry got hit the hardest by the pandemic and has mostly bounced back over the past year, although growth in that sector has flattened out lately. "More people are coming off the sidelines and going back to work," said Fiorille. "Typically that's the frontline jobs in leisure and hospitality, and we're seeing that tick up."

On a regional and local basis, he noted that the South continues to be the outperformer, with North Carolina, Georgia and Texas performing the strongest. North Carolina led the way among states for the fourth month in a row on jobs, but was down from a year ago (-0.07%), the state's first decline since March 2021. Georgia had the best one-month gain (0.63%) among states in November as its index jumped back above 100. 

In terms of wages, Missouri led the states in hourly earnings growth at 6.58%, followed by Florida and Texas, which also have growth above 6%. Houston overtook Dallas for the first time as the top metropolitan area in terms of jobs. Dallas and Miami led the way on hourly earnings growth among metro areas in November, with both reporting 6.69%. Tampa (6.29%) and Baltimore (6.27%) also had growth above 6%.

In terms of advice to give small business clients, Fiorille suggests they talk about changes happening at the end of the year in laws at both the federal and state levels. Those include minimum wage laws, as well as the cost-of-living increases for Social Security recipients and annual inflation adjustments on various tax items at the Internal Revenue Service.