Hiring at U.S. small businesses increased during February, led by hiring in the leisure and hospitality industry, according to research by Paychex and IHS Markit, a provider of information and analytics. The company’s Small Business Jobs Index, which measures national employment growth for businesses with fewer than 50 workers, increased to 99.66 while the rate of hourly wage growth declined to 4.49% year-over-year. For the third consecutive month, the monthly annualized hourly wage growth rate stood below 4%.
“This employment growth and cooling wage inflation in February show small businesses are demonstrating resiliency as they navigate the current economic environment,” said Paychex President and CEO John Gibson. “Given the slowing wage increases, employees of small businesses seem to be contending with inflation by increasing their hours worked.”
In further detail, the February report showed:
- At 99.66, the pace of small business employment growth improved in January (0.18%) and again in February (0.10%) to begin 2023.
- The national index (99.66) is down 1.64% from the record level set last February (101.33).
- At 100.84, leisure and hospitality improved for the fourth straight month and reported its largest one-month gain since January 2022.
- At 99.86, the Midwest has had the strongest one-month change rate among regions for the past three months. Led by Illinois, the Midwest gained 0.77% during the past quarter.
- North Carolina gained 0.37% in February, improving its index to 102.57. The state has ranked first since June 2022 and has had an index above 102 since October 2021.
- Houston (103.16) led metro areas in the rate of small business employment growth during February. The next strongest metros, Chicago (101.55), Atlanta (101.47) and Phoenix (101.41) all trail Houston by more than a point and a half.
- Construction trails only leisure and hospitality in growth for hourly earnings (5.11%), weekly earnings (5.98%) and weekly hours worked (0.69%).
- Hourly earnings growth slowed further to 4.49% in February. One-month annualized growth remained below 4% for the third consecutive month.
- Because of the positive momentum in weekly hours worked, weekly earnings growth reached a record level of 5.09% in February (5.09 percent). That’s the highest level since reporting began in 2011.
According to the U.S. Chamber of Commerce, American small businesses are upbeat about the prospects for their own sales and revenue, but not optimistic about the economy’s health.