Small Business Hiring Advances in October; Wage Growth Hits Record High

National job growth was on the rise for the fifth consecutive month in October and wages are increasing dramatically too, according to aggregated payroll data of Paychex. The data released in the latest report of the Paychex | IHS Markit Small Business Employment Watch shows the Small Business Jobs Index for October increased to 100.45, up 0.50 percent in October and 6.50 percent over a year ago. In response to labor market pressures, hourly earnings growth improved to 3.85 percent in October, a new record level since reporting began ten years ago.

“The Small Business Jobs Index added another 0.50 percent to reach 100.45 in October, its best level in four and a half years, indicating that small business hiring is improving rapidly,” said James Diffley, chief regional economist at IHS Markit.

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“The positive gains seen since June indicate that jobs lost in 2020 are steadily coming back, although there’s still ground to make up to return to pre-pandemic levels,” said Martin Mucci, Paychex president and CEO. “With hourly earnings growth at record levels, you can see employers are responding to labor market pressures and the impact of many workers leaving their current jobs and seeking new opportunities.”

In further detail, the October report showed:

• The national jobs index surpassed 100 for the first time since 2017.
• At a national level, hourly earnings growth has steadily increased, from 2.99 percent in June to 3.85 percent in October.
• Of the 20 largest states based on U.S. population, nine have hourly earnings growth above four percent.
• With hourly earnings growth at record levels, weekly earnings growth is also on the rise, increasing to 3.15 percent in October.
• Leisure and hospitality leads sectors in earnings and hours worked growth for the seventh consecutive month.
• The West is the new top region for small business employment growth, overtaking the South.

Paychex business solutions reach 1 in 12 American private-sector employees, making the Small Business Employment Watch an industry benchmark. Drawing from the payroll data of approximately 350,000 Paychex clients with fewer than 50 employees, the monthly report offers analysis of national employment and wage trends, as well as examines regional, state, metro, and industry sector activity.

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The complete results for October, including interactive charts detailing all data, are available at www.paychex.com/watch. Highlights are available below.

National Jobs Index

• The national index topped 100 for the first time since 2017, recording its fifth consecutive month of gains.
• At 100.45, the national index increased 0.50 percent in October and 6.50 percent since October 2020.
• Small business employment growth continues, though total employment remains far from its pre-pandemic level.

National Wage Report

• Small business hourly earnings growth improved to 3.85 percent in October, a new record level since reporting began ten years ago.
• Weekly earnings growth increased to 3.15 percent, its fourth consecutive improvement.
• One-month annualized weekly hours worked growth was positive in October (1.17 percent) for the first time in six months.

Regional Jobs Index

• At 100.98, the West overtook the South as the top region for small business employment growth. The West has gained more than eight percent in 2021, improving all but one month.
• The Midwest and Northeast also had significant one-month gains, increasing 0.71 percent and 0.70 percent respectively.

Regional Wage Report  

• Both earnings and hours worked growth are strongest among regions in the West. At 4.19 percent, the West is the only region with hourly earnings growth above four percent.
• Weekly earnings growth in the Midwest (2.35 percent) is nearly one percent lower than all other regions.
• Though weekly hours worked growth is weakest in the Northeast (-0.73 percent), one-month annualized growth spiked to 2.53 percent indicating the start of a quick rebound in hours worked.

State Jobs Index

• At 103.17, Texas has the strongest index among states in October and is at its highest level in more than six years. Texas has ranked first or second throughout 2021.
• Washington saw the best one-month growth rate among states as its index improved 1.61 percent in October. Washington has also seen significant year-over-year growth (10.87 percent).
• 16 of 20 states analyzed increased their rate of small business job growth in October.

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

State Wage Report

• Nine states have hourly earnings growth above four percent, while only two states, Maryland and Virginia, have growth below three percent.
• North Carolina leads states with hourly earnings growth of 4.69 percent in October. However, the state is last in weekly hours worked growth (-1.35 percent).
• Georgia is the only state with weekly earnings growth above four percent.

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

Metropolitan Jobs Index 

• Dallas’ jobs index climbed to 104.32 as it leads metros in the rate of small business employment growth during the past year by a wide margin.
• Tampa, Phoenix, Atlanta, and Houston all have index levels above 102.
• At 96.99, employment growth@ in Baltimore slowed 0.16 percent in October and is the only metro below 98.50.

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

Metropolitan Wage Report

• Denver leads metros in both earnings (5.51 percent) and hours worked growth (0.44 percent), likely due to difficulty in hiring as their jobs index is in the bottom three with the weakest 12-month change rate.
• Hourly earnings growth in Baltimore moved above two percent for the first month since March, but continues to be ranked last among metros.
• Only four metros have positive weekly hours worked growth in October: Denver, Minneapolis, Houston, and Seattle.

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

Industry Jobs Index

• Employment in Leisure and hospitality continues to grow the fastest, adding 0.96 percent in October to 103.21. At 88.22 in October 2020, Leisure and hospitality has gained 16.99 percent during the past 12 months.
• Manufacturing scored the second fastest gain in October, 0.71 percent, as its index rose to 99.99.
• Financial activities was the only sector to slow in October and ranks last at 98.50.

Note: Analysis is provided for seven major industry sectors. Definitions of each industry sector can be found here. The other services (except 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 

• Leisure and hospitality leads sectors in earnings and hours worked growth for the seventh consecutive month. Leisure and hospitality reported earnings growth above eight percent and is the only sector with positive year-over-year weekly hours worked growth.
• While hourly earnings growth in education and health services has been very stable during the past six months (2.78 percent), the sector ranks last as rising labor demand is forcing wages higher in other sectors.
• Hourly earnings growth in construction increased to 3.73 percent in October, its fifth consecutive increase and in line with the consistently higher one-month annualized growth during the same time period.

Note: Analysis is provided for seven major industry sectors. Definitions of each industry sector can be found here. The other services (except 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.

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