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Small Business Unemployment: Job Growth Declines in June, Despite Wage Growth

image for Aila Images / Shutterstock
Aila Images / Shutterstock
  • Hourly earnings overall grew by 70 cents last month.
  • Just as in previous months, Southern states lead in employment growth, while Western states have the best hourly earnings growth.
  • The leisure and hospitality industry showed the biggest decline in job growth last month, dropping 0.85%.

Experts warn of an "increasingly tight labor market" as small business job growth stalls and wages continue to increase, according to the Paychex | IHS Markit Small Business Employment Watch for June.

Released each month by Paychex and IHS Markit, the Small Business Employment Watch examines employment and wage trends throughout the country. The report, drawn from payroll data collected from Paychex's roughly 350,000 clients, gives insights into economic trends at the national, regional and local levels.

Last month, the national jobs index was at 98.32, marking a 1.09% decrease over the past 12 months. James Diffley, chief regional economist at IHS Markit, said the two-yearslong slowing of small business job growth "took on a more rapid pace" in June. At the same time, wages went up another 70 cents to reach an average of $27.21.

Given the monthly report's findings for June, Martin Mucci, Paychex president and CEO, said things look like they may get better for small business workers.

"The jobs index is still reflective of employment growth, though at a slower pace than recent years," he said. "With hourly earnings growth increasing, it appears the challenging hiring environment is finally starting to push wage growth higher for small business workers."

According to the Small Business Employment Watch, June's national job index figure of 98.32 represents a 0.45-point drop from May. This slight decline deviates from previous monthly reports, which generally suggested that job growth had plateaued for some months. Despite ongoing trade tensions with major powers around the world, the American economy continues to be in a state of growth.

When it comes to this month's hourly wages figure, the June increase to $27.21 marks a 2.65% increase over the last 12 months and remains just barely ahead of the 2018 average increase of 2.49%. This latest bump also marks the third consecutive month that hourly earnings grew, according to officials.

The hourly earnings growth may mark an increase, but officials also pointed out that weekly earnings growth declined by 2.02% due to what officials called "a continued decrease in hours worked from a year ago."

Unlike last month's report – which saw Tennessee, Texas, Georgia and Arizona with job indexes exceeding the 100 mark – only Texas and Tennessee held on to that distinction in June. In fact, all 20 states analyzed in the Small Business Employment Watch saw a decline. Massachusetts and New Jersey were at the bottom of the list with job indexes of 97.45 and 97.01 respectively.

Earning the distinction of the fastest hourly earnings growth last month was Illinois with a 3.97% increase. Officials said that figure nearly doubles the state's mark from last June at 2.05%. The hourly earnings increase also places Illinois at the top of this month's list, with New York (3.36%) and Missouri (3.35%) taking up the next two spots. Indiana sits at the bottom of the list with just a 0.65% wage growth. The state also has the weakest weekly earnings and weekly hours worked compared to other states.

All four regions saw a slight decline in small business job growth in June, with the Northeast marking the lowest figure at 97.6. For 37 of the last 38 months, the South is the only region with a job index above the 99 mark.

The country's four regions each saw wage increases. The West continued to have the highest average hourly earnings in June at $28.73, with a 3.13% year-over-year increase (87 cents), while the Midwest's average hourly earnings rate stands at $25.79, with a 2.6% year-over-year increase (65 cents).

At the metropolitan level, Dallas continued to boast the highest jobs index with 102.63. The number marks a slight decline from May's 103.65 figure, but it remains the leader of the pack by a wide margin. Only Tampa joined Dallas in having a job index above 100. Atlanta, Denver, Phoenix and Seattle all fell below that mark after strong showings in May.

For wages, San Diego maintained its place at the top of the highest hourly earnings growth list at 4.24%. Chicago showed the second largest hourly earnings growth in June at 3.89%. Officials also noted that Riverside, California, started the year with more than 4% in hourly earnings growth, but it dropped to 2.8% in June.

The Small Business Employment Watch also measured how specific industries fared. According to officials, all industry sectors examined in the monthly study showed decreases in growth last month.

Manufacturing stayed at the bottom of the list in year-to-year performance at 96.21, marking a 2.64% decrease from the previous year. The education and health services industry had the strongest one-month, three-month and 12-month growth rates among all industries. However, it also saw its hourly earnings stagnate for the entire quarter, ending up in last place at 1.29%.

Though the leisure and hospitality industry continued its hourly earnings growth trend in June at 4.7%, its job index fell by 0.85% to end up at 97.75.

Andrew Martins

Andrew Martins is an award-winning journalist with a Bachelor of Arts in journalism from Ramapo College of New Jersey. Before joining Business.com and Business News Daily, he wrote for a regional publication and served as the managing editor for six weekly papers that spanned four counties. Currently, he is responsible for reviewing tax software and online fax services. He is a New Jersey native and a first-generation Portuguese American, and he has a penchant for the nerdy.