Hourly earnings growth is below four percent for the second-straight month

According to the Paychex | IHS Markit Small Business Employment Watch, the national Small Business Jobs Index — which measures the rate of small business job growth in the U.S. — is essentially flat at 99.10, a decrease of 0.04% in August. Meanwhile, an hourly earnings growth rate of 3.98% among U.S. small businesses is unchanged in August from July and below four percent for the second consecutive month.

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From July to August, the national Small Business Jobs Index is essentially flat while hourly earnings growth nationally is below four percent for the second-straight month. (Graphic: Business Wire)

“The Small Business Jobs Index moderated for the fifth consecutive month and the flattening of earnings growth both align with a stabilizing U.S. labor market,” said James Diffley, chief regional economist, S&P Global Market Intelligence.

“Our data indicates America’s small businesses are adding workers at a sustained and modest rate,” said John Gibson, Paychex president and CEO. “Regarding hourly earnings, last month we reported a growth rate below four percent for the first time since 2021. Seeing that trend continue this month is an encouraging sign that wages are normalizing along with overall inflation.”

In further detail, the August report shows:

• The pace of small business job growth has changed over the past year from 99.94 in August 2022 to 99.10 in August 2023.
• Despite slowing for the sixth consecutive month, North Carolina is once again the top-ranked state for small business job growth (100.69), overtaking Texas (100.46).
• Houston’s jobs index (102.06) ranks first among metros in August and is more than a point higher than second-ranked Miami (100.82).
• Hourly earnings growth was unchanged at 3.98% in August, though one-month annualized growth increased to 4.71%.
• Weekly hours worked growth has slowed in recent months and is down 0.45% year-over-year.
• At 99.71, the South leads regional small business job growth for the 17^th consecutive month despite slowing each month since February 2023.
• Only four states have increased their pace of job growth from a year ago, with Wisconsin leading the way, gaining 1.77% from last August to 99.53.
• At its 2023 peak, Washington leads states in hourly earnings growth (4.87%). However, weekly hours worked growth in Washington continues to rank last among states and has been negative for the past two years.
• While the lowest performing sector among industries, Manufacturing (97.24) showed the most significant gains in August (0.21%).

Paychex solutions reach 1 in 12 American private-sector employees, making the Small Business Employment Watch an industry benchmark. Drawing from the payroll data of approximately 350,000 Paychex clients with fewer than 50 employees, the monthly report offers analysis of national employment and wage trends, as well as examines regional, state, metro, and industry sector activity.

The complete results for August 2023, including interactive charts detailing all data, are available at www.paychex.com/watch. Highlights are available below.

August 2023 Paychex | IHS Markit Small Business Employment Watch

National Jobs Index

• The national small business jobs index moderated 0.04% to 99.10 in August, its fifth consecutive decrease.
• The pace of small business job growth (99.10) has slowed 0.84% from a year ago (99.94).
• Demonstrating moderate small business job growth, the national index has stayed between 99 and 100 for the past year.
  
  

National Wage Report

• Hourly earnings growth is unchanged in August (3.98%), though one-month annualized growth is now at 4.71%.
• Weekly hours worked growth has slowed considerably in recent months and is down 0.45% YoY.
• One-month annualized weekly hours worked growth has lost an average of 2.04% during each of the past six months.
  
  

Regional Jobs Index

• At 99.71, the South leads regional small business job growth for the 17^th consecutive month, despite slowing each month since February 2023.
• The West (98.89) is unchanged in August as the region continues to report slow but steady job gains.
• The Northeast remains the weakest region for small business job growth at 98.59 but is the only region to improve in August (0.06%).

Regional Wage Report

• At 4.32%, the West leads regional hourly earnings growth for the third straight month and is the only region with growth above four percent.
• The South began 2023 with hourly earnings growth above five percent (5.01%) but has decelerated consistently over the past eight months, dropping below four percent in August (3.99%).
• Weekly hours worked growth has slowed in all four regions over the past year, with recent months indicating further deceleration.
  
  

State Jobs Index

• Despite its small business job growth rate slowing for the sixth consecutive month, North Carolina is once again the top-ranked state (100.69), overtaking Texas (100.46).
• At 98.17, New York ranks last among states for the third month, having slowed 2.18% from a year ago (100.35).
• Only four states have improved their rate of job growth from a year ago. Among them, Wisconsin is leading the way as the state’s small business job growth accelerated 1.77% from August 2022 to 99.53 this month.

State Wage Report

• Now at its strongest level in 2023 so far, Washington leads states in hourly earnings growth (4.87%). However, weekly hours worked growth in Washington continues to rank last among states and has been negative throughout past two years.
• North Carolina (0.06%) is the only state with positive weekly hours worked growth in August.
• With the number of hours worked dropping across nearly all states, Texas (4.20%), Arizona (4.06%), and Wisconsin (4.02%) are the only three states with weekly earnings growth above four percent.
• Indiana (2.69%) is the only state with hourly earnings growth below three percent in August.

Metropolitan Jobs Index

• Houston’s jobs index (102.06) ranks first among metros in August and is more than a full point higher than second-ranked Miami (100.82).
• Tampa (98.57) and Dallas’ (98.55) indices are both down 1.15% from July, the worst one-month change rate among metros.
• At 97.03, Denver is down 3.65% from last year and is more than a point lower than the next weakest metro in August.

Metropolitan Wage Report

• California metros San Diego (5.13%) and Riverside (5.06%) lead the pack in hourly earnings growth for August.
• San Francisco ranks last among metros in both hourly earnings growth (2.69%) and weekly earnings growth (1.89%).
• Miami (0.26%) is the only metro with positive weekly hours worked growth.

Industry Jobs Index

• Despite having the highest index among sectors in August (100.99), Other Services’ job growth rate slowed more than any other industry’s from July to August (-0.33%).
• Manufacturing (97.27), the lowest performer among sectors, has the most significant growth in its pace (0.21%).
• Education and Health Services continues to report strong small business job gains, at 100.61 in August with an average of 100.69 throughout 2023.
• Leisure and Hospitality (99.31) reported its first gain since February – a modest 0.07% increase.

Industry Wage Report

• Construction ranks first for weekly hours worked growth (0.05%), the only sector with a positive growth rate. Construction also ranks second among sectors for hourly earnings (4.44%) as well as weekly earnings growth (4.09%) in August.
• Leisure and Hospitality (4.83%) tops sectors for hourly earnings growth in August, maintaining its two-and-a-half-year streak occupying one of the top two spots among sectors.
• Other Services ranks last among sectors for both earnings measures as well as hours worked growth.

For more information about the Paychex | IHS Markit Small Business Employment Watch, visit www.paychex.com/watch and sign up to receive monthly Employment Watch alerts.

*Information regarding the professions included in the industry data can be found at the Bureau of Labor Statistics website.

About the Paychex | IHS Markit Small Business Employment Watch

The Paychex | IHS Markit Small Business Employment Watch is released each month by Paychex, Inc., a leading provider of payroll, human resource, insurance, and benefits outsourcing solutions for small-to medium-sized businesses, and S&P Global Market Intelligence, a Division of S&P Global (NYSE: SPGI), which merged with IHS Markit in 2022 and is a provider of information services and solutions to global markets. Focused exclusively on small business, the monthly report offers analysis of national employment and wage trends, as well as examines regional, state, metro, and industry sector activity. Drawing from the payroll data of approximately 350,000 Paychex clients, this powerful tool delivers real-time insights into the small business trends driving the U.S. economy.

About Paychex

Paychex, Inc. (Nasdaq: PAYX) is an industry-leading HCM company delivering a full suite of technology and advisory services in human resources, employee benefit solutions, insurance, and payroll. The company serves approximately 740,000 customers in the U.S. and Europe and pays one out of every 12 American private sector employees. The more than 16,000 people at Paychex are committed to helping businesses succeed and building thriving communities where they work and live. To learn more, visit paychex.com and stay connected on Twitter and LinkedIn.

About S&P Global Market Intelligence

At S&P Global Market Intelligence, we understand the importance of accurate, deep and insightful information. Our team of experts delivers unrivaled insights and leading data and technology solutions, partnering with customers to expand their perspective, operate with confidence, and make decisions with conviction.

S&P Global Market Intelligence is a division of S&P Global (NYSE: SPGI). S&P Global is the world’s foremost provider of credit ratings, benchmarks, analytics and workflow solutions in the global capital, commodity and automotive markets. With every one of our offerings, we help many of the world’s leading organizations navigate the economic landscape so they can plan for tomorrow, today. For more information, visit www.spglobal.com/marketintelligence.

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