Small Business Hiring Continues Slowing Trend
At a time when small business owners are apparently feeling optimistic about the future and increasing their revenues, hiring among such companies has continued to fall. According to the latest study by Paychex (as reported on by CNBC), that trend continued in March. In fact hiring at small businesses fell to its lowest point in more than seven years last month.
The Small Business Jobs Index saw a .12% decrease from February to March, marking a 1.07% decline over the past 12 months. However average hourly wages have been rising steadily. In March, wages reached an annual growth rate of 2.66%, which equates to $.69 an hour. Overall the national average hourly wage was $26.48 for the month.
As you might already expect, these two figures are likely related and hint that it’s not that small business owners don’t want to be hiring. IHS Markit economist James Diffley explains, “Small business job growth slowed slightly yet again, to its lowest point in more than seven years. This could be the beginning of accelerating wage growth to attract more employees.” Similarly Paychex CEO Marin Mucci noted, “Larger employers are adding more workers than smaller businesses at this time, though the tightening labor market is impacting businesses of all sizes.”
Bucking the national trend, there were a few states where small business employment was growing. For example Tennessee regained its status as the top state for small business employment growth last month. However, when it comes to metro areas, Denver came out on top, followed by Seattle, Houston, Dallas, and Riverside, California. Meanwhile, in terms of wages, Arizona outperformed the pack with the average hourly wage growing 4.74% in the last year. Likewise the Phoenix metro area outpaced all others with 5.14% growth followed by a quartet of Californian cities (San Deigo, Riverside, Los Angeles, and San Francisco) all in the 3.4% to 3.85% range. Joining the Grand Canyon State, California (3.56%), New York (3.29%), and Missouri (3.0%) all saw strong 12-month wage gains as well.
Taking the latest data into consideration it does seem like small businesses are experiencing one downside of a strong economy. While sales and profits may be up, falling unemployment means it’s harder to attract top talent — especially without raising wages. So although few entrepreneurs said they planned to use their tax cuts to fund increased wages for employees, it seems they may end up doing just that if these current trends continue.