Small Businesses Maintain Steady Hiring Pace in February

March 12, 2024 at 08:30 AM EDT

The CBIZ Small Business Employment Index reported a slight increase in hiring amid unexpected strength in the U.S. economy

The CBIZ Small Business Employment Index (“SBEI”) reported a seasonally adjusted increase of 0.17% in February as the U.S. economy has shown unexpected strength amid the high interest rate environment. The CBIZ SBEI tracks payroll and hiring trends for over 2,900 companies that have 300 or fewer employees, providing broad insight into small business trends.

“Small businesses steadily expanded their workforces, driven by the current economic resilience,” said Anna Rathbun, CFA, Chief Investment Officer, CBIZ Investment Advisory Services, LLC. “If this momentum continues, there could be a positive trajectory for small business hiring, reflective of their adaptability and belief in the strength of the U.S. economy despite ongoing challenges like higher interest rates.”

The Bureau of Labor Statistics’ employment report indicated hiring growth that beat expectations. The February reading showed an overall increase of 275,000 private-sector jobs. Even with the overall hiring growth, the national unemployment rate increased to 3.9%. The report is inclusive of all non-farm private employers across businesses of all sizes. Meanwhile, the ADP employment report indicated hiring growth among small, medium and large-sized companies. Its February reading showed an overall increase of 140,000 private-sector jobs for the month. Small businesses accounted for an increase of 13,000 of those jobs on a seasonally adjusted, month-over-month basis. The ADP report counts small businesses as companies with 49 or fewer employees, while the CBIZ SBEI uses data from companies with 300 employees or fewer.

On a regional basis, the West (0.78%) region experienced the largest hiring increase, followed by the Southeast (0.64%) and Central (0.17%) regions. The Northeast (-0.58%) was the only region to experience a decline.

On an industry level, gains in employment were seen in Administrative and Support Services; Arts, Entertainment and Recreation; and Technology and Life Sciences. Industry decreases were seen in Accommodation and Food Services, Insurance, and Utilities.

Rathbun added, “While the headline nonfarm payroll figures surpassed expectations, we're seeing a concentration of hiring in sectors that typically don't signal a robust economic cycle. The rise in the unemployment rate to a two-year high, alongside this pattern, suggests a nuanced picture beneath the surface.”

To view an infographic with data from the employment index, visit the CBIZ website.

Additional takeaways from the February SBEI include:

February’s snapshot: 20% of companies in the index increased staffing, 60% made no change to their headcounts and 20% reduced employment totals.

Industries at-a-glance: Administrative and Support Services; Arts, Entertainment, and Recreation; and Technology and Life Sciences experienced hiring gains. Decreases were seen in Accommodation and Food Services, Insurance, and Utilities.

Geographical hiring: The West (0.78%), Southeast (0.64%) and Central (0.17%) regions experienced hiring increases. The Northeast (-0.58%) region experienced a decrease.

What’s next? If economic conditions remain favorable, this could lead to a more robust and sustained period of employment growth within the small business sector, potentially overcoming the challenges posed by high interest rates.

The February CBIZ SBEI data follows the Q1 2024 release of the CBIZ Main Street Index, which surveyed over 1,304 businesses throughout the U.S. as they navigate the current economic environment.* The data revealed a notable positive shift in economic sentiment, with only 33% reporting concerns about interest rates affecting their bottom line, compared to 61% in the third quarter of 2023.

*Note: Not all of those surveyed in the CBIZ Main Street Index are clients of CBIZ.

Editor’s note:

(1) The SBEI illustration is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License. Based on our work at https://www.cbiz.com.

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About CBIZ

CBIZ is a leading provider of financial, insurance and advisory services to businesses throughout the United States. Financial services include accounting, tax, government health care consulting, transaction advisory, risk advisory, and valuation services. Insurance services include employee benefits consulting, retirement plan consulting, property and casualty insurance, payroll, and human capital consulting. With more than 120 offices in 32 states, CBIZ is one of the largest accounting and insurance brokerage providers in the U.S. For more information, visit https://www.cbiz.com.