The "Paychex | IHS Markit Small Business Employment Watch" was created by a team of highly qualified data scientists at Paychex, with input and consultation from IHS Markit. The monthly reports serve as a barometer of labor market trends with a specific focus on insights from small businesses across the US.
Each month, Insightful Accountant will sit down with Frank Fiorille, Paychex’s VP of Risk, Compliance and Data Analytics, to share a deep dive into the latest employment data sharing key trends, highlights from the results, job market implications and predictions for the month ahead.
Here’s the first one in our series.
What were the main takeaways from the February Small Business Employment Watch?
Following eight consecutive months of growth, the national small business jobs index was unchanged and remained at its record level set last month (101.33). "The Small Business Employment Watch" tracks several labor market indicators, including hiring, wages and hours worked. In February’s report, we also saw continued strength in wage growth.
What trends do the report show in terms of employment rate and wages?
As the rate of inflation has steadily risen in recent months, so too has wage growth (although inflation has grown at a faster rate than wage growth in recent months). In February, hourly earnings growth continued its nine-month climb, increasing nearly 5% (4.82%).
Other factors that are driving wage growth include the increased minimum wage rates by states and municipalities, and businesses adapting to recruitment and retention challenges by offering competitive salaries and well-rounded benefits.
Were there any standouts or surprises in the results?
Historically, from a geographic standpoint, the South has been a strong leader for hiring and employment growth, as many people have recently migrated or moved to southern states.
But what stands out to me this month is the strong job gains seen in the West. The West now has surpassed the South when looking at the rate of employment and weekly earnings growth. At the state level, North Carolina jumped up to the No. 1 spot for small business job growth, surpassing Texas and Arizona.
Which industries showed growth/declines in terms of employment and wages?
Month after month, the leisure and hospitality industry shows the strongest results—in both employment and wage growth. The wage growth in leisure and hospitality has been especially strong, up double-digits in both hourly and weekly earnings growth. Financial services remains the weakest among sectors in small business employment growth.
In future reports, we might see a dip in the construction sector as a result of supply chain constraints and the rising cost of materials.
Any predictions or thoughts for next month’s report?
Looking ahead, we anticipate more positive growth throughout the spring and summer months. More people will likely return to the workforce, as comfort levels with the status of the pandemic begin to increase. Also, with the stimulus money winding down, people who previously left jobs may start to go back to work.
Is there anything accountants should be aware of as they advise their clients with this month's results in mind?
We continue to see a flurry of activity from states enacting new regulations. For accountants who support clients across the US, it can be challenging keeping track of all these changes. Accountants should pay close attention when it comes to areas like paid leave and minimum wage.
Additionally, there has been talk of another wave of stimulus funding specifically for small businesses in the hospitality sector. Accountants should follow this development closely and inform clients on what this could mean for them.
For a full breakdown of the small business hiring and wage insights available from the Paychex | IHS Markit Small Business Employment Watch, visit www.paychex.com/watch.
Frank Fiorille is the VP of risk management, compliance, and data analytics at Paychex. Fiorille currently serves as one of the chief stewards of risk for the company, leading the implementation of all aspects of the risk function, including processes, tools and systems to identify, assess, measure, manage, monitor and report risks. In addition to his overall risk management responsibilities and heading the compliance and data science functions, Fiorille oversees the government relations and operating risk functions for Paychex.
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