ROCHESTER, NY—The Paychex | IHS Markit Small Business Employment Watch for July shows slight declines in the rates of small business jobs and wage growth. At 99.34 in July, the Small Business Jobs Index is down 0.63% year-over-year. Hourly earnings growth stands at 2.42%, up $0.63 from a year ago. Since last July, hourly earnings growth has slowed 0.54%.
“The Small Business Jobs Index slipped slightly again in July, to 99.34. It has been on a steady downtrend for the past 18 months, falling 1.43% during that time, while large employers have expanded payrolls,” said James Diffley, chief regional economist at IHS Markit.
“We continue to see declining wage growth, which is unexpected in such a tight labor market,” said Martin Mucci, Paychex president and CEO. “We recently surveyed business owners to look into this further. Of those who don’t plan to raise wages this year, the majority (65%) indicated they’re not making enough profit to do so, others are choosing to invest in other aspects of their business (28%).”
Industry Jobs Index
- Down 1.32% year-over-year, leisure and hospitality has dropped from above 100 in July 2017 to below 99 this July.
- With its tenth decrease during the past 12 months, other services (except public administration) slowed 2.7%, worst among industry sectors.
Industry Wage Report
- At 3.02% in July, construction continues to show very steady hourly earnings growth, averaging just above 3% during the past two years.
- Hourly earnings growth in the other services (except public administration) sector has dropped off quickly in 2018. Ranked first among industries in December 2017 (4.17%), other services now ranks last at 1.78%.
National Jobs Index
- The national index continued its slow decline, down 0.19% during the past quarter and 0.63% during the past year.
- Reflecting tightening labor markets, the 12-month change in the index has been negative since March 2017.
National Wage Report
- Wage gains continued what is now a year-long slide for both the hourly and weekly earnings measures.
- Since last July, weekly earnings growth has slowed from 3.1% to 2.65%, and hourly earnings growth has slowed from 2.96% to 2.42%.
Regional Jobs Index
- With an index below 99, the Northeast is the weakest region for small business employment growth.
- The South has been the strongest region for more than two years, but its employment growth has slowed the most year-over-year, 0.79%.
Regional Wage Report
- The Midwest was the only region to see an increase in weekly earnings growth in July, albeit a very slight 0.01% increase.
- The earnings gap between regions is widening as the region with the lowest wage, the Midwest, also has the weakest growth rate. Conversely, the region with the highest wage, the West, also has the strongest growth rate.
State Jobs Index
- With its fourth consecutive increase, Arizona surged to become the top-ranked state. At 100.91, Arizona’s employment growth increased 0.72% in July and 1.43% year-over-year.
- Michigan continued its recent surge with its third consecutive large gain, improving to 100.74. Meanwhile, Michigan’s neighbor to the south, Indiana, at 98.51, fell to last place among states and is at its lowest level in nearly eight years.
State Wage Report
- Only three of the 20 most populous U.S. states have hourly earnings growth exceeding 3%—Arizona, California and Tennessee.
- Arizona, which now leads states in employment growth, per the Paychex | IHS Small Business Jobs Index, also continues to lead states in wage growth.
Metropolitan Jobs Index
- At 101.14 and gaining more than 2% since March, Phoenix jumped to the top of the employment growth metro rankings.
- Los Angeles was unchanged in July and remains the only metro below 98. Nevertheless, all other metros in California improved in July.
Metropolitan Wage Report
- Hourly earnings growth is accelerating in Denver. Averaging less than 3% growth during 2017, Denver’s hourly earnings growth is averaging 3.58% in 2018 and is up 3.85% in July.
- At $23.80, Riverside, CA, has the lowest hourly earnings among metros, but is experiencing strong growth, 4.42% in July. Additionally, one-month and three-month annualized growth rates are over 5%.
