Small Business Wage Growth Continues Downward Trend, While Job Growth Remains Stable

One-month annualized hourly earnings growth hits lowest level since 2020

According to the Paychex | IHS Markit Small Business Employment Watch, job growth across the U.S. remains moderate but is growing at a slower rate than a year ago. Meanwhile, growth in hourly and weekly earnings decelerated in October, consistent with recent trends. Hourly earnings growth is below four percent (3.56%) for the fourth-straight month.

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Small business job growth has slowed 0.66% from a year ago, but remains above pre-pandemic (2019) levels. Hourly earnings growth is below four percent for the fourth-straight month. (Graphic: Business Wire)

“Over the past year and a half, we’ve seen a stabilization of the growth of both small business jobs and wages, in line with macroeconomic trends,” said John Gibson, Paychex president and CEO. “Following a long period of wage inflation, we are seeing that trend begin to cool, as the supply and demand for workers appears to be coming back into balance.”

“The small business employment and wage trends we’re seeing at a national level can be largely attributed to changes taking place in individual industry sectors,” added Frank Fiorille, Paychex vice president of risk, compliance, and data analytics. “For instance, in Leisure and Hospitality, hourly earnings growth is declining and fell below four percent for the first time since 2021.”

In further detail, the October 2023 report shows:

• The rate of small business job growth has slowed 0.66% from a year ago to 98.77 but remains above pre-pandemic (2019) levels.
• Hourly earnings growth has decelerated in 16 of the past 17 months, declining from 5.17% in May 2022 to 3.56% in October 2023.
• One-month annualized hourly earnings fell to 2.27%, the lowest level since November 2020.
• Leisure and Hospitality hourly earnings growth slowed below four percent (3.93%) for the first time since February 2021.
• The South leads regional small business job growth for the 19^th consecutive month. At 4.10%, the West tops regional hourly earnings growth for the fifth-straight month.
• At 100.66, North Carolina has led the pace of small business job growth among states for the 15th of the past 16 months. Meanwhile, Michigan and Ohio are the two weakest states for job growth in October.
• Indiana (100.11) ranks second among states for small business job growth and is the only state with positive one-month, three-month, and 12-month change rates. The Hoosier State also has the lowest hourly earnings growth rate at 2.16%.
• Houston has now been the strongest among the top U.S. metros for small business job growth for a year. In October, its index stands at 101.83, more than 1.50 points above the second-place metro (Chicago).

Paychex solutions reach 1 in 12 American private-sector employees, making the Small Business Employment Watch an industry benchmark. Drawing from the payroll data of approximately 350,000 Paychex clients with fewer than 50 employees, the monthly report offers analysis of national employment and wage trends, as well as examines regional, state, metro, and industry sector activity.

The complete results for October 2023, including interactive charts detailing all data, are available at www.paychex.com/watch. Highlights are available below.

October 2023 Paychex | IHS Markit Small Business Employment Watch

National Jobs Index

• The pace of small business job growth slowed for the seventh consecutive month, declining 0.12% to 98.77 in October.
• The rate of small business job growth has slowed in 17 of the last 20 months, falling from the record high of 101.33 in February 2022 to 98.77 in October 2023.
• At 98.77, the national index is down 0.66% from a year ago as slower but moderate growth remains.

National Wage Report

• Hourly earnings growth slowed to 3.56% in October 2023, declining 16 of the past 17 months.
• One-month annualized hourly earnings growth fell to 2.27%, the lowest level since November 2020.
• Weekly earnings growth decreased to 3.27%, slowing approximately one and a half percent so far in 2023.
• Down 0.39% from last year in October, weekly hours worked growth has been relatively unchanged during the past several months.

Regional Jobs Index

• The South decreased 0.25% to 99.26 in October and, despite slowing each month since February 2023, the South leads regional small business job growth for the 19th consecutive month.
• The Midwest (98.78) has ranked second among regions for the past year.
• The Northeast (98.39) remains the weakest region for small business employment growth but was unchanged in October.

Regional Wage Report

• At 4.10%, the West leads regional hourly earnings growth for the fifth-straight month and remains the only region above four percent.
• The Midwest ranks last among regions in the level and growth rate of weekly earnings ($954.78 and 3.13%).
• Annual weekly hours worked growth is negative for all regions, though all regions are positive from a three-month annualized perspective.

State Jobs Index

• At 100.66, North Carolina has led the pace of small business job growth among states for 15 of the past 16 months.
• In the Midwest states, Michigan (97.86) and Ohio (97.98) are the two weakest states for job growth in October.
• Ranked second among states as recently as May, the rate of job growth in Georgia fell 0.95% to 98.42, 15th among states in October.

State Wage Report

• At 5.18%, Washington ranks first among states for hourly earnings growth for the fourth consecutive month. Washington is the only state with hourly earnings growth above five percent, which is also true for one-month and three-month annualized growth.
• Indiana (2.16%) and Georgia (2.68%) are the only two states with hourly earnings growth below three percent. Both states reported growth above five percent in October 2022.

Metropolitan Jobs Index

• Houston (101.83) continues to be the strongest among top U.S. metros for small business job growth, a distinction it has held for the past 12 months and is more than a point and a half above the next-best metros (Chicago: 100.21, Miami: 100.14).
• San Francisco (98.57) has the best three-month and 12-month change rates among metros at 0.41% and 1.14%, respectively.
• Denver (96.35) remains the weakest among top U.S. metros for the fourth consecutive month and is the only metro below 97. The area slowed 0.82% in October and 3.79% from last October.

Metropolitan Wage Report

• Seattle (5.14%) is the only metro with hourly earnings growth above five percent in October and is the only metro with one-month and three-month annualized growth above five percent.
• Hourly earnings growth in Atlanta has quickly slowed in 2023, falling to 2.03% in October, the weakest among top U.S. metros. The metro averaged 5.45% growth in 2022.
• San Diego was the only top U.S. metro to report weekly earnings growth above four percent in October (4.02%).
• Miami is the only metro with positive weekly hours worked growth in October (0.29%).

Industry Jobs Index

• Other Services (100.70) and Education and Health Services (100.33) are the top two sectors for small business job growth for the seventh consecutive month.
• At 98.26 in October, the rate of small business job growth in Leisure and Hospitality slowed 0.59% from last month and 1.74% from last year, the most significant change rate among industries.
• Financial Activities (97.98) gained 0.09% during the past quarter and is the only industry to improve its pace of job growth.

Industry Wage Report

• Construction leads growth among sectors in hourly earnings (4.18%), weekly earnings (4.19%), and weekly hours worked (0.09%) in October.
• Trade, Transportation, and Utilities ranks second in growth among sectors in hourly earnings (3.97%), weekly earnings (4.03%), and weekly hours worked (0.06%).
• Leisure and Hospitality hourly earnings growth slowed to 3.93%, marking its first month below four percent since February 2021. Leisure and Hospitality ranks fourth among sectors in October after ranking first or second for the past two and a half years.

For more information about the Paychex | IHS Markit Small Business Employment Watch, visit www.paychex.com/watch and sign up to receive monthly Employment Watch alerts.

*Information regarding the professions included in the industry data can be found at the Bureau of Labor Statistics website.

About the Paychex | IHS Markit Small Business Employment Watch

The Paychex | IHS Markit Small Business Employment Watch is released each month by Paychex, Inc., a leading provider of payroll, human resource, insurance, and benefits outsourcing solutions for small-to medium-sized businesses, and S&P Global Market Intelligence, a Division of S&P Global (NYSE: SPGI), which merged with IHS Markit in 2022 and is a provider of information services and solutions to global markets. Focused exclusively on small business, the monthly report offers analysis of national employment and wage trends, as well as examines regional, state, metro, and industry sector activity. Drawing from the payroll data of approximately 350,000 Paychex clients, this powerful tool delivers real-time insights into the small business trends driving the U.S. economy.

About Paychex

Paychex, Inc. (Nasdaq: PAYX) is an industry-leading HCM company delivering a full suite of technology and advisory services in human resources, employee benefit solutions, insurance, and payroll. The company serves approximately 740,000 customers in the U.S. and Europe and pays one out of every 12 American private sector employees. The more than 16,000 people at Paychex are committed to helping businesses succeed and building thriving communities where they work and live. Visit paychex.com to learn more.

About S&P Global Market Intelligence

At S&P Global Market Intelligence, we understand the importance of accurate, deep and insightful information. Our team of experts delivers unrivaled insights and leading data and technology solutions, partnering with customers to expand their perspective, operate with confidence, and make decisions with conviction.

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