Employees of Small Businesses Stand to Benefit from the Positive Trend in Both Wages and Hours Worked in 2021

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Riverside, CA leads metros in hourly and weekly earnings growth. Courtesy Photo of Paychex • IHS Markit Small Business Employment Watch

The latest Paychex | IHS Markit Business Employment Watch shows that small business hiring held mostly steady in February. The Small Business Jobs Index moderated -0.03 percent to 93.97. Wages are trending in a positive direction to begin 2021. Both hourly earnings and weekly hours worked had two consecutive months of growth. Hourly earnings growth increased to 2.91 percent, and hours worked growth improved 0.37 percent. Weekly earnings growth also rose above three percent for the first time since September 2020.

“The Small Business Jobs Index remains relatively flat once again this month and is 4.43 percent below its pre-pandemic level from a year ago,” said James Diffley, chief regional economist at IHS Markit.

“The increase in hours worked and earnings is a positive indicator for small businesses, a segment that has struggled throughout the COVID-19 pandemic to maintain staff at their previous pay and hours. However, there is still support needed for these entrepreneurs and their employees,” said Martin Mucci, Paychex president and CEO. “Last week, the Biden Administration established new guidance so businesses with 20 employees or less can apply exclusively for Paycheck Protection Program (PPP) loans for the next week. We look forward to helping many of these small businesses take advantage of this opportunity and quickly apply for this funding through our PPP loan estimator and forgiveness tools in Paychex Flex®.”

The monthly report, widely considered an industry benchmark, draws payroll data of approximately 350,000 Paychex clients to gauge small business wage and employment trends on a national, regional, state, metro, and industry basis.

In further detail, the February report showed:

• Fifteen of the 20 states analyzed have positive weekly hours worked growth in February.

• The South ranks first among regions in small business employment growth, but last in earnings and hours worked growth.

• The Northeast ranks last among regions in small business employment growth, but first in earnings and hours worked growth.

• Florida and Texas remain the top-ranked states for job growth, retaining a wide lead with index levels slightly below 97.

• Tampa’s jobs index surged 0.90 percent in February, making it the top-ranked metro for small business job growth.

• Manufacturing showed the most substantial job growth increase among industries in February, up 0.36 percent.

The complete results for February, including interactive charts detailing all data at a national, regional, state, metro, and industry level, are available at www.paychex.com/watch. Highlights are available below.

Note: Data presented for the month of January was collected between January 15, 2021 and February 18, 2021.

National Jobs Index

• The Small Business Jobs Index slowed 0.03 percent from last month to 93.97.

• Though the national index moderated just -0.03 percent, February’s results represent a new low.

• Small business employment growth is down 4.43 percent from a year ago.

National Wage Report

• Hourly earnings growth increased to 2.91 percent in February. One-month annualized growth spiked to 3.74 percent.

• Weekly hours worked growth continued to rise, starting the year with two consecutive months of positive growth.

• Weekly earnings growth rose to 3.26 percent in February. It’s the first time growth has surpassed three percent since September 2020.

Regional Jobs Index

• The South is again the top-ranked region and is more than one point higher (95.34) than the next highest-ranked region, the Midwest (94.20).

• The Northeast ranks last among regions at 93.11 and has seen the largest decline from a year ago, down 5.29 percent.

• The Midwest was the only region to increase in February, up 0.15 percent.

Regional Wage Report

• The South ranks first among regions in small business employment growth, but last in earnings and hours worked growth. The South is the only region with weekly earnings growth below two percent and negative weekly hours worked growth.

• The Northeast ranks last among regions in small business employment growth, but first in earnings and hours worked growth. The Northeast is the only region with hourly earnings growth above four percent and has the strongest weekly hours worked growth.

State Jobs Index

• Florida and Texas remain the top-ranked states, retaining a wide lead with index levels slightly below 97.

• Wisconsin fell 0.48 percent in February to 92.85, joining Virginia, New York, and Washington among the states with the lowest employment growth levels.

• Virginia has the weakest growth rates among states, down 0.52 percent from last month and 7.51 percent from last year. Note: Analysis is provided for the 20 largest states based on U.S. population.

State Wage Report

• Fifteen of the 20 states analyzed have positive weekly hours worked growth in February.

• Massachusetts overtook New Jersey as the top-ranked state for hourly earnings growth in February.

• Four states, Texas, Tennessee, North Carolina, and Illinois, have hourly earnings growth below two percent. Note: Analysis is provided for the 20 largest states based on U.S. population. Metropolitan Jobs Index

• Tampa’s index surged 0.90 percent in February, making it the top-ranked metro for small business job growth.

• Seattle, San Francisco, and Washington have the weakest index levels among metros, each below 92.

• Houston’s index spiked 1.15 percent in February. However, the increase will likely be offset due to the fallout of the recent winter storm.

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

Metropolitan Wage Report

• Riverside, CA leads metros in hourly and weekly earnings growth. One-month annualized growth is up double-digits for both measures, likely due to the state’s recent minimum wage increase.

• Texas metros Dallas and Houston rank last among metros in hourly earnings growth, both below 1.50 percent.

• Hourly earnings growth in Boston hit a new ten-year high in February at 4.86 percent.

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

Industry Jobs Index

• Construction remains a bright spot throughout the pandemic. February marks the industry’s tenth consecutive month as the top-ranked sector.

• Leisure and Hospitality avoided further declines in February but remained down more than eleven percent from last year.

• Manufacturing had its best one-month gain since last May and is up 0.36 percent.

Note: Analysis is provided for seven major industry sectors. Definitions of each industry sector can be found here. The Other Services (excluding 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

• Construction is not only leading in job growth, it’s seeing stable hourly earnings growth as well, reaching 3.62 percent in February and averaging 3.62 percent during the past year.

• Weekly hours worked growth in Leisure and Hospitality bottomed out in December at -4.14 percent. It’s now recovered two percent during January and February to -2.14 percent. Note: Analysis is provided for seven major industry sectors. Definitions of each industry sector can be found here. The Other Services (excluding 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.

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

Paychex, Inc • Contributed

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