There is good news for workers across the country, wages are starting to pick up. However, the tightening labor market is continuing to impact employers, with no real end in sight.
New Paychex | IHS Markit Small Business Employment Watch data for October reflects the tight labor market with a dip in job growth and an uptick in wages. Down 0.06% from September at 99.12, the Small Business Jobs Index has slowed 1.28% over the past 2 years, consistent with a declining rate of unemployment in the same timeframe. The rate of hourly earnings growth in October stands at 2.41% ($0.63), increasing for the second month in a row.
“The national index has dropped 0.77 percent in the past year and 1.28 percent in the past two years,” said James Diffley, chief regional economist at IHS Markit. “This slowdown in small business employment growth has coincided with the sharp fall in unemployment over the past two years.”
“According to the latest Paychex Business Sentiment Report … business owners rank their ability to fill open positions with qualified candidates as a top challenge,” said Martin Mucci, Paychex president and CEO. “With employment growth continuing to show moderate declines, we’re seeing first-hand the impact of the tightening labor market on small businesses.”
Broken down further by geography and industry, the October report showed:
- The top regions for employment growth and wage growth, respectively, are the South and West.
- Texas ranks highest among states for jobs growth; Arizona ranks first in wage growth.
- Denver remains first among metros in jobs growth; Phoenix regained the lead in wage growth.
- The index for Construction has now been above 100 for 7 years.
The complete results for October, including interactive charts detailing all data at a national, regional, state, metro, and industry level, are available at www.paychex.com/employment-watch/. Highlights are
National Jobs Index
- Small business job gains continue to slow, declining 0.06% further in October to 99.12.
- The national index has fallen by 1.65% since its recent peak in February 2017
National Wage Report
- At 2.41%, hourly earnings growth increased for the second straight month.
- Weekly earnings growth slipped to 2.53%, impacted by the decrease in weekly hours worked growth, which fell for the first time since 2016.
Regional Jobs Index
- The Northeast and Midwest had the steepest declines, down the most among regions in October and from last year.
- The West ranks second among regions, at 99.51, but is the only region to show year-over-year improvement in the pace of small business job growth.
Regional Wage Report
- The West continues to lead hourly earnings growth at 3.24%, while the other regions are less than 2.50%.
- The Midwest has shown a marked acceleration in hourly earnings growth during the past 2 months, improving from 2.05% to 2.47%.
State Jobs Index
- Leading all states, Texas and Arizona had strong gains in October and are the only two states with positive year-over-year growth.
- Pennsylvania (98.00) and Massachusetts (98.09) trail all states in small business employment growth.
Note: Analysis is provided for the 20 largest states based on U.S. population.
State Wage Report
- At 3.41% in October and averaging 3.42% during 2018, hourly earnings growth in California has been very consistent.
- Above 3% in October 2017, Texas’ hourly earnings growth has decelerated quickly to 1.31%.
Note: Analysis is provided for the 20 largest states based on U.S. population.
Metropolitan Jobs Index
- Denver and Phoenix lead in job gains, with Dallas, Houston, and Tampa also showing strong growth with index levels above 100.
- With its fourth strong gain in the past 6 months, San Francisco improved to 99.68 and is up 2.31% from last October.
- At 97.36, Philadelphia has fallen to the lowest metro ranking, down nearly 2% during the past quarter.
Note: Analysis is provided for the 20 largest metro areas based on U.S. population.
Metropolitan Wage Report
- Phoenix, AZ; Riverside, CA; and Denver, CO lead metros with wage growth above 4%.
- Houston and Dallas have the lowest hourly earnings growth rates among metros.
Note: Analysis is provided for the 20 largest metro areas based on U.S. population.
Industry Jobs Index
- At 97.84 and down 0.42% in October, Manufacturing slowed further as the lowest-ranked sector.
- At 100.10 and very steady during the past quarter, Construction has now been above 100 for 7 years.
Note: Analysis is provided for seven major industry sectors.
Industry Wage Report
- After strong gains in 2017, wage growth in the Other Services (except Public Administration) sector has slowed dramatically. It is currently below 1% in October 2018.
- Like job growth, wage growth in Construction has been solid and consistent. Hourly earnings growth has been just above three percent since April 2017.
Note: Analysis is provided for seven major industry sectors.
For more information about the Paychex | IHS Markit Small Business Employment Watch, visit www.paychex.com/employment-watch/.