Paychex | IHS Markit Small Business Employment Watch: Job Growth Shows Slight Increase in May, Annual Wage Growth Dips to 2.59 Percent

The Small Business Jobs Index increased 0.07 percent to 99.60 in May
At $26.61, hourly earnings growth increased 2.59 percent YOY ($0.67); one-month and three-month annualized hourly earnings growth continue to trend higher than the annual rate

South leads regions in employment growth; West ranks highest for wage growth
Texas ranks first in state job growth; Arizona remains first in annual hourly earnings growth
Denver continues to lead metros in job growth; Phoenix remains first among metros in wage growth
At 100.30, Construction has been above 100 for the past six years; Trade, Transportation, and Utilities leads weekly earnings growth among industries (4.07 percent)

The Paychex | IHS Markit Small Business Employment Watch for May shows a small increase in the rate of hiring and a slight decrease in the pace of wage growth. The Small Business Jobs Index grew for the first time since January, up 0.07 percent to 99.60. Job growth among small businesses is down 0.73 percent year-over-year, reflecting tightening labor markets. Hourly earnings grew $0.67 to $26.61, up 2.59 percent from last year. The pace of annual wage growth is down from its peak of 2.96 percent in June 2017, but one-month (2.80 percent) and three-month (2.86 percent) annualized hourly earnings growth continue to trend higher than the annual rate.

“The national index saw a slight improvement in May, its first since January, but remains below 100,” said James Diffley, chief regional economist at IHS Markit.

“It’s encouraging to see the jobs index increase for the first time since January. The modest rate of growth in small business employment reflects the continuing pressure of the tightening labor market,” said Martin Mucci, Paychex president and CEO.

National Jobs Index

At 99.60, the Small Business Jobs Index increased slightly in May, but is down 0.73 percent year-over-year.
Reflecting tightening labor markets, the 12-month growth rate has been negative since March 2017.
National Wage Report

Hourly earnings growth peaked at 2.96 percent in June, but has steadily decelerated to 2.59 percent in May.
The three-month annualized growth rate improved to 2.86 percent, increasing for the sixth consecutive month.
At 2.80 percent, the one-month annualized growth rate continues to trend higher than the annual rate, but reversed its path downward in May.
Regional Jobs Index

Back over 99, the West had its best one month gain in more than a year, 0.21 percent.
The Midwest was the only region to decrease in May, declining slightly (0.07 percent) to 99.75.
Regional Wage Report

Decelerating further in May to 2.25 percent, the South is now the weakest region for hourly earnings growth.
Though hourly earnings growth is only slightly higher in the Midwest, 2.29 percent, one-month and three-month annualized growth rates are both above three percent.
State Jobs Index

With its third strong gain of 2018, Texas moved into first place among states with an index level of 101.09.
Back to 100, Missouri jumped four spots in April and 10 spots in May, improving more than two percent in 2018.
Note: Analysis is provided for the 20 largest states based on U.S. population.

State Wage Report

Falling below one percent in May, Virginia is experiencing a quick drop-off in hourly earnings growth in 2018.
Wage growth is slowing moderately in New York, but remains above three percent and near the top of the state rankings.
Earnings growth in Illinois has picked up in 2018, averaging an $0.08/hour increase per month, compared to only $0.04/hour in 2017.
Note: Analysis is provided for the 20 largest states based on U.S. population.

Metropolitan Jobs Index

St. Louis is over 100 for the first time since 2016 and is ranked sixth among metros, its highest ranking in more than 10 years.
Detroit jumped 0.41 percent in May and is back over 100 for the first time since May 2017.
Houston continues to show strong improvement in small business employment growth, up 2.17 percent year-over-year and over 101.
Note: Analysis is provided for the 20 largest metro areas based on U.S. population.

Metropolitan Wage Report

Topped by Phoenix, the Southwestern metros remain the leaders in wage gains.
Seattle has both the weakest hourly earnings and weekly hours worked growth among metros. Ranked positively in 2017, wage growth has quickly lost momentum in Seattle during 2018.
Note: Analysis is provided for the 20 largest metro areas based on U.S. population.

Industry Jobs Index

At 99.36, Leisure and Hospitality has trended below 100 since September, but had a solid 0.26 percent gain in May and remains the sector with the best performance compared to the 2004 base year.
At 100.30, Construction has been above 100 for the past six years, signifying steady small business employment growth.Note: Analysis is provided for seven major industry sectors.
Industry Wage Report

Near four percent, Leisure and Hospitality has had the strongest hourly earnings growth each month of 2018.
Professional and Business Services has decelerated to 2.17 percent growth in May, ranking last among industry sectors in 2018.
At 4.07 percent, Trade, Transportation, and Utilities leads weekly earnings growth among industries.
Note: Analysis is provided for seven major industry sectors.

For more information about the Paychex | IHS Markit Small Business Employment Watch, including interactive charts detailing all data at a national, regional, state, metro, and industry level, visit www.paychex.com/employment-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 IHS Markit, a world leader in critical information, analytics, and expertise. 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.

The Small Business Jobs Index increased 0.07 percent to 99.60 in May
At $26.61, hourly earnings growth increased 2.59 percent YOY ($0.67); one-month and three-month annualized hourly earnings growth continue to trend higher than the annual rate

South leads regions in employment growth; West ranks highest for wage growth
Texas ranks first in state job growth; Arizona remains first in annual hourly earnings growth
Denver continues to lead metros in job growth; Phoenix remains first among metros in wage growth
At 100.30, Construction has been above 100 for the past six years; Trade, Transportation, and Utilities leads weekly earnings growth among industries (4.07 percent)

The Paychex | IHS Markit Small Business Employment Watch for May shows a small increase in the rate of hiring and a slight decrease in the pace of wage growth. The Small Business Jobs Index grew for the first time since January, up 0.07 percent to 99.60. Job growth among small businesses is down 0.73 percent year-over-year, reflecting tightening labor markets. Hourly earnings grew $0.67 to $26.61, up 2.59 percent from last year. The pace of annual wage growth is down from its peak of 2.96 percent in June 2017, but one-month (2.80 percent) and three-month (2.86 percent) annualized hourly earnings growth continue to trend higher than the annual rate.

“The national index saw a slight improvement in May, its first since January, but remains below 100,” said James Diffley, chief regional economist at IHS Markit.

“It’s encouraging to see the jobs index increase for the first time since January. The modest rate of growth in small business employment reflects the continuing pressure of the tightening labor market,” said Martin Mucci, Paychex president and CEO.

National Jobs Index

At 99.60, the Small Business Jobs Index increased slightly in May, but is down 0.73 percent year-over-year.
Reflecting tightening labor markets, the 12-month growth rate has been negative since March 2017.
National Wage Report

Hourly earnings growth peaked at 2.96 percent in June, but has steadily decelerated to 2.59 percent in May.
The three-month annualized growth rate improved to 2.86 percent, increasing for the sixth consecutive month.
At 2.80 percent, the one-month annualized growth rate continues to trend higher than the annual rate, but reversed its path downward in May.
Regional Jobs Index

Back over 99, the West had its best one month gain in more than a year, 0.21 percent.
The Midwest was the only region to decrease in May, declining slightly (0.07 percent) to 99.75.
Regional Wage Report

Decelerating further in May to 2.25 percent, the South is now the weakest region for hourly earnings growth.
Though hourly earnings growth is only slightly higher in the Midwest, 2.29 percent, one-month and three-month annualized growth rates are both above three percent.
State Jobs Index

With its third strong gain of 2018, Texas moved into first place among states with an index level of 101.09.
Back to 100, Missouri jumped four spots in April and 10 spots in May, improving more than two percent in 2018.
Note: Analysis is provided for the 20 largest states based on U.S. population.

State Wage Report

Falling below one percent in May, Virginia is experiencing a quick drop-off in hourly earnings growth in 2018.
Wage growth is slowing moderately in New York, but remains above three percent and near the top of the state rankings.
Earnings growth in Illinois has picked up in 2018, averaging an $0.08/hour increase per month, compared to only $0.04/hour in 2017.
Note: Analysis is provided for the 20 largest states based on U.S. population.

Metropolitan Jobs Index

St. Louis is over 100 for the first time since 2016 and is ranked sixth among metros, its highest ranking in more than 10 years.
Detroit jumped 0.41 percent in May and is back over 100 for the first time since May 2017.
Houston continues to show strong improvement in small business employment growth, up 2.17 percent year-over-year and over 101.
Note: Analysis is provided for the 20 largest metro areas based on U.S. population.

Metropolitan Wage Report

Topped by Phoenix, the Southwestern metros remain the leaders in wage gains.
Seattle has both the weakest hourly earnings and weekly hours worked growth among metros. Ranked positively in 2017, wage growth has quickly lost momentum in Seattle during 2018.
Note: Analysis is provided for the 20 largest metro areas based on U.S. population.

Industry Jobs Index

At 99.36, Leisure and Hospitality has trended below 100 since September, but had a solid 0.26 percent gain in May and remains the sector with the best performance compared to the 2004 base year.
At 100.30, Construction has been above 100 for the past six years, signifying steady small business employment growth.Note: Analysis is provided for seven major industry sectors.
Industry Wage Report

Near four percent, Leisure and Hospitality has had the strongest hourly earnings growth each month of 2018.
Professional and Business Services has decelerated to 2.17 percent growth in May, ranking last among industry sectors in 2018.
At 4.07 percent, Trade, Transportation, and Utilities leads weekly earnings growth among industries.
Note: Analysis is provided for seven major industry sectors.

For more information about the Paychex | IHS Markit Small Business Employment Watch, including interactive charts detailing all data at a national, regional, state, metro, and industry level, visit www.paychex.com/employment-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 IHS Markit, a world leader in critical information, analytics, and expertise. 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.