Small Business Job Growth Continues to Slow as Wages Rise

As unemployment continues to fall, the big story surrounding small businesses has been the apparent worker shortage that has led to both slowing job growth and increased wages. Now the latest Small Business Employment Watch data from Paychex and IHS Markit reflects that reality, with the index ticking down to 99.12. This amounts to a .77% year over year decrease and is down 0.06% from last month.

Speaking on this month’s results, IHS Markit chief regional economist James Diffley said, “The national index has dropped 0.77% in the past year and 1.28% in the past two years. This slowdown in small business employment growth has coincided with the sharp fall in unemployment over the past two years.” Similary Paychex CEO Martin Mucci highlighted the hiring troubles entrepreneurs have reported, noting, “According to the latest Paychex Business Sentiment Report, released yesterday, business owners rank their ability to fill open positions with qualified candidates as a top challenge.” He continued, “With employment growth continuing to show moderate declines, we’re seeing first-hand the impact of the tightening labor market on small businesses.”

Of course, while job growth has slowed, wage growth has picked up. October’s report found the average hourly wage to be $26.85. That’s up 2.41% — or $0.63 — from last year. That’s easily a positive for workers but Mucci says some small business owners may have trouble keeping up. In an interview with CNBC, Mucci said, “Small businesses didn’t gain quite as much from tax reform. They’re having a harder time raising wages to get those people.” Mucci went on to note, “They also don’t have as much flexibility on raising benefits and putting more effort into recruiting, so they have a little bit tougher time.” While Mucci might speak somewhat from a place of theory, his sentiments were echoed by small business owner Judy Briggs in the Chicago Sun-Times, with Briggs saying of wages, “The most I can do is $15. The bigger companies are hurting us little guys.”

Taking a closer look at the report, the south proved to be the top region for employment growth while the western region saw the most wage growth. More specifically Texas came out on top in terms of jobs growth and Arizona had the greatest growth in wages. As for the sectors that are seeing the most growth, the report notes that the construction vertical index has remained above 100 for seven straight years.

At this point the worker shortage that many small businesses are experiencing is not exactly news. However monthly reports like this one from IHS Markit and Paychex as well as other indexes such as that released by the National Federation of Independent Business continue to highlight how the problem is affecting both businesses and workers. Furthermore the focus on the problem has seemingly shifted some to look at the discrepancy between how big businesses and smaller ones are being impacted by the recent tax law changes and other economic factors. As a result this surely won’t be the last we hear about shrinking job growth, increasing wages, or similar issues facing today’s small business owners.

Small business are continually changing and there are lots of job seekers out there but they don’t fit with the position needed.

There will never be a shortage of workers, but most of them are mismatched with the vacncies available.

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Jonathan Dyer

I'm a small town guy living in Los Angeles looking to make solid financial decisions. I write for a number of finance websites, including HuffingtonPost and Business2Community. I founded in 2015 to focus on personal finance and the emerging FinTech markets.

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