Small Business Jobs and Wages Increase Modestly in March

Small business employment has grown consistently during the first quarter of 2023, according to the Paychex | IHS Markit Small Business Employment Watch. The Small Business Jobs Index, which measures employment growth, increased modestly (0.06%) from the previous month to 99.73. The March report also showed average hourly earnings increased slightly from the previous month to 4.64 percent.

“The small business economy continues to demonstrate durability with the jobs index advancing each month this year along with moderate wage gains,” said James Diffley, chief regional economist, S&P Global Market Intelligence.

“The Main Street small- and mid-sized business owners continued to show their resiliency in the first quarter of 2023,” said John Gibson, Paychex CEO. “This is an encouraging start to the year and policymakers are going to need to carefully consider their next actions as the full impact of the recent banking disruptions on SMB’s access to capital is still not fully understood.”

In further detail, the March report showed:

Following several months of moderation, national hourly earnings growth increased slightly to 4.64 percent in March as one-month annualized growth reached 5.34 percent.
The national jobs index has risen for three consecutive months, with the South’s growth—the only region with an index above 100—continuing to lead the country.
Weekly hours worked rose 0.21 percent YOY (to 32.63) while one-month annualized growth moderated for the first time since August 2022.
The South led regions for the twelfth consecutive month and is the only region with an index above 100 (100.68). Still, the South reported its first decrease (-0.14 percent) since September 2022.
Despite its job growth slowing by 0.42 percent, North Carolina’s robust performance continued in March, with the state’s index hitting 102.13.
Illinois’ growth rate rose 0.25 percent last month and 1.70 percent year-over-year. At 101.92 and second among states, Illinois’ performance in March is the strongest it’s seen since 2014.
Small business employment growth remained strong in Houston (103.10), making the city the first among metros for the fifth consecutive month.
Leisure and hospitality led sectors in jobs growth (101.32) and hourly earnings growth (5.96 percent).

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 March, including interactive charts detailing all data, are available at www.paychex.com/watch. Highlights are available below.

National Jobs Index

At 99.73, the pace of small business employment growth increased 0.06 percent in March and 0.35 percent during the first quarter of 2023.
Despite consecutive gains in the first three months of 2023, the national Index is down 1.55 percent from a year ago.

National Wage Report

Following several months of moderation, national hourly earnings growth increased to 4.64 percent in March and one-month annualized growth reached 5.34 percent.
At 32.63 hours, weekly hours worked were up year-over-year (0.21 percent), though one-month annualized growth dropped (0.03 percent) for the first time since August 2022.

Regional Jobs Index

The South led regions for the twelfth consecutive month and is the only region with an index above 100 (100.68). Still, the South reported its first decrease (-0.14 percent) since September 2022.
At 99.96, the Midwest ranked second among regions—as it has for the past two quarters—and its Index has increased for four consecutive months.
March brought hints of a narrowing growth gap between regions, as the bottom-ranked West lead the country in gains (0.19 percent) and the top-ranked South lead in losses
(-0.14 percent).

Regional Wage Report

The South led hourly earnings growth among regions (4.86 percent) for the eighth consecutive month.
The Midwest ranked last among regions in hourly earnings growth (4.45 percent) and first in weekly hours-worked growth (0.52 percent).
Hourly earnings growth in the West grew to 4.77 percent in March, as one-month annualized growth jumped to 6.24 percent—its highest level since 2019.

State Jobs Index

North Carolina’s growth rate slowed 0.42 percent in March to 102.13. However, the state continued its nine-month streak as the country’s leader.
Illinois’ growth rate rose 0.25 percent last month and 1.70 percent YOY. At 101.92 and second among states, Illinois’ performance in March is the strongest it’s been since 2014.
At 98.54, California ranked last among states but showed its largest one-month gain (0.22 percent) in more than a year.

Note: Analysis is provided for the 20 largest states based on U.S. population.

State Wage Report

Florida ranked first among states for the ninth consecutive month despite its hourly earnings growth rate slowing to 5.56 percent in March.
At 3.18 percent, Virginia remained last among states for hourly earnings growth, a trend that has persisted since June 2022.
Missouri led overall growth among states for weekly earnings (6.04 percent) and weekly hours worked (0.93 percent).

Note: Analysis is provided for the 20 largest states based on U.S. population.

Metropolitan Jobs Index

Small business employment growth remained strong in Houston (103.10), making the city the first among metros for the fifth consecutive month.
Falling below 100 for the first time this year, the Dallas metro’s Job Index dropped
5 percent YOY, falling from 105.12 to 99.86 between March 2022 and March 2023.
San Diego remains last among metros with its index dropping 4.02 percent YOY. At 97.66, it was the only state with an index below 98.

Note: Analysis is provided for the 20 largest metro areas based on U.S. population.

Metropolitan Wage Report

Miami led metros in hourly (5.80 percent) and weekly (6.15 percent) earnings growth.
San Francisco had the highest hourly earnings among metros ($39.28) but the lowest growth rate (3.55 percent).
Philadelphia and nearby Baltimore lead metros in weekly hours-worked growth, 0.46 and 0.45 percent, respectively.

Note: Analysis is provided for the 20 largest metro areas based on U.S. population.

Industry Jobs Index

Following four months of gains, leisure and hospitality’s Job Index dropped to 101.32 in March, though it remained the top sector for small business employment growth.
Manufacturing slowed 97.71 (a 0.16 percent drop) in March, maintaining its status as the weakest sector for the eighth consecutive month.

Note: Analysis is provided for seven major industry sectors. Definitions of each industry sector can be found here. The other services (except public administration) industry category includes religious, civic, and social organizations, as well as personal services, including automotive and household repair, salons, drycleaners, and other businesses.

Industry Wage Report

Leisure and hospitality lead sectors in hourly earnings growth (5.96 percent) for the fifth straight month, despite falling below six percent for the first time since April 2021.
Ranked second among sectors, construction reached a new record for hourly earnings growth, reaching 5.28 percent for the first time since reporting began in 2011.
Hourly earnings growth for education and health services continued to rank last among sectors as it has for the past 18 months. The average growth rate during that period (3.77 percent) is in line with the current growth rate (3.78 percent).

The Small Business Jobs Index methodology was updated with the March 2023 index published on April 4, 2023 to utilize the most up-to-date industry coding possible. The historical update is reflected in the March 2023 report and only affects the sectors reported within the “industry” dimension. For a full description of the report’s updated methodology, read “Understanding the Jobs Index” on the Paychex website.

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.

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