The Paychex Small Business Employment Watch for August 2024, reflecting data from U.S. small businesses with fewer than 50 employees, reveals a significant slowdown in hourly earnings growth. For the first time since January 2021, the growth rate has fallen below 3%, landing at 2.89%. Additionally, the one-month annualized hourly earnings growth has decreased to 1.91%. The national small business jobs index has averaged 100.37 over the first eight months of 2024, indicating modest employment growth.
- Employment and Wage Trends:
- Hourly Earnings Growth: August 2024 saw hourly earnings growth decline to 2.89%, a noteworthy drop and the first time in nearly three years that growth has dipped below 3%.
- Jobs Index Overview: The national jobs index registered at 99.89 in August, a slight increase from July but still below 100, suggesting nominal year-over-year job losses.
- Weekly Hours Worked: National weekly hours worked growth has remained negative year-over-year for 17 consecutive months, although there was a positive one-month annualized growth in August for the first time since January 2024.
- Regional and Sector Insights:
- Midwest Leading in Employment Growth: The Midwest region continued to lead small business employment growth with an index of 100.50. Indiana, in particular, topped the charts with a score of 101.87, the only state to see a positive 12-month change.
- Top Industry Sectors: The Education and Health Services sector remained the top performer for job growth at 101.87, marking its third consecutive month leading the industry sectors.
- Construction Industry Performance: Construction led all industries in hourly earnings growth (3.66%), weekly earnings growth (3.81%), and weekly hours worked growth (0.27%) for the 10th consecutive month.
- CEO Insights:
- Cooling Labor Market: John Gibson, President and CEO of Paychex, highlighted the significance of the recent data, noting the moderate changes in employment growth throughout 2024 and the deceleration of wage growth. This trend aligns with broader expectations of a cooling labor market and the potential for the Federal Reserve to begin lowering interest rates.
The August 2024 Paychex Small Business Employment Watch presents clear signals of a cooling labor market, with hourly earnings growth falling below 3% for the first time since 2021. While some regions and sectors continue to show strength, the overall trend suggests a return to pre-pandemic labor market conditions.
