Following April Surge, Small Business Job Growth Holds Pace in May

The rate of job growth in leisure and hospitality continued to increase but slowed in the construction industry

The rate of job growth was largely unchanged in May, according to aggregated payroll data of approximately 350,000 clients provided by Paychex. The data released in the May report of the Paychex | IHS Markit Small Business Employment Watch shows the Small Business Jobs Index moderated slightly, slowing 0.07 percent month over month. Hourly and weekly earnings growth fell below three percent in May, driven by part-time workers with lower wages returning to the workforce.

“The Small Business Jobs Index did not show significant growth—holding steady in May,” said James Diffley, chief regional economist at IHS Markit. “Small businesses are struggling to return to normal operations and expand due to labor shortages.”

“In addition to the hiring challenges seen nationally, job growth declines in the construction industry impacted the positive momentum of the past few months. The high cost and low availability of materials drove job growth in construction down 1.78 percent in May,” said Martin Mucci, Paychex president and CEO. “At the same time, with more people dining out and travel increasing across the U.S., job growth in the leisure and hospitality industry is rebounding significantly, and wages are too.”

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In further detail, the May report showed:

• The national index is up 4.58 percent during the past quarter, driven largely by the lower employment comparison level last year.
• Job growth in the construction industry slowed sizably in May, down 1.78 percent.
• Leisure and hospitality continued their comeback, gaining 1.94 percent in May and 12.40 percent during the past quarter.
• The South continues to lead all regions in small business job growth.
• Texas once again takes the top ranking for job growth among states.
• Tampa leads metros in small business job growth.

Paychex business solutions reach 1 in 12 American private-sector employees, making the Small Business Jobs Index report an industry benchmark. The national jobs index uses a 12-month same-store methodology to gauge small business employment trends on a national, regional, state, metro, and industry basis.

National Jobs Index

• The national index moderated slightly in May, slowing 0.07 percent to 98.27.
• The national index is up 4.58 percent during the past quarter, driven in large part by the lower employment comparison level last year.
• The national index has returned to pre-pandemic levels, though early 2020 levels indicated small business job growth had declined since 2017.

National Wage Report

• With lower wage and part-time workers returning to the workforce, hourly and weekly earnings growth has slowed in 2021.
• Hourly and weekly earnings growth slipped to below three percent in May.
• Weekly hours worked growth slowed to 0.09 percent but remains positive year-over-year.

Regional Jobs Index

• The South remained the strongest region for small business job growth, more than one point above the national index level.
• The West improved for the third consecutive month and was the only region with positive gains in May. The West overtook the Midwest for second place among regions, the first time the area has ranked this high since 2019.

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Regional Wage Report  

• The Midwest has seen continued wage declines, while the West has gained, perhaps reflecting different degrees of re-opening.
• The West and Northeast both saw hourly earnings growth above three percent in May.
• Weekly hours worked in the Northeast are down 0.69 percent from last year, largely due to a higher percentage of part-time employees displaced during the height of business shutdowns last year.

State Jobs Index

• Led by Texas, six states have an index level above 100 in May.
• Washington ranks last among states for the eleventh consecutive month at 94.73.
• North Carolina jumped five spots in April to land among the top five states for small business employment growth. The state held its position in May with another solid gain (0.61 percent).

State Wage Report

• Missouri (3.92 percent) led states in hourly earnings growth in May, followed by New Jersey (3.65 percent) and Massachusetts (3.50 percent).
• Georgia and California have the strongest weekly earnings growth among states, both above four percent. Illinois ranks last and is the only state with weekly earnings growth below two percent.

Metropolitan Jobs Index 

• Tampa continued to lead all metros at 102.13, despite a 0.61 percent decrease in May.
• The top eight metros all slowed from April to May.
• Washington is the only metro with an index that’s lower than its May 2020 level.
• Dallas slowed nearly one percent in May but remains firmly in second place among metros at 101.16.

Metropolitan Wage Report

• Riverside, CA is the only metro with hourly earnings growth above four percent and the only metro with weekly earnings growth above five percent.
• Weekly hours worked are up 2.13 percent from last year in Seattle, best among metros. Despite hourly earnings growth below two percent, weekly earnings growth topped four percent in May, aided by the boost in hours worked.
• Five metros have hourly earnings below two percent (Baltimore, Houston, Dallas, Chicago, and Seattle).

Industry Jobs Index

• Construction slowed sizably in May, down 1.78 percent, perhaps reflecting supply bottlenecks in a robust building environment.
• Leisure and hospitality industries continued their strong comeback, gaining 1.94 percent in May and 12.40 percent during the past quarter. Leisure and hospitality was the only sector to see gains in May.

Industry Wage Report 

• Wage rates in leisure and hospitality are increasing significantly, with weekly earnings growth up 9.35 percent. The next strongest sector is construction, up just 3.79 percent.
• Hourly earnings growth is below three percent in all but two sectors, leisure and hospitality and trade, transportation, and utilities.
• Earnings and hours worked have steadied in manufacturing.

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