Paychex reported a modest increase in small business employment in April for the fourth consecutive month.
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“With the April index we’re up about 0.4 percent in the first few months of ’16, so we’re seeing a nice stable improvement over the first four months, and it’s probably the best stability that it’s had in the 10 years that we’ve done the index,” said Paychex president and CEO Martin Mucci. “It’s also just half a percentage point off the high of two years ago in 2014, so we’re continuing to see good moderate employment growth from small businesses, and it seems to be pretty steady.”
At 101.87, the Mountain region continues to be the leading regional index in the survey. Washington State expanded its performance as the top state by moving to an index level above 104, while Seattle again ranks as the top metropolitan area for small business job growth.
“Seattle continues to accelerate and is doing well over last year,” said Mucci. “Dallas comes in second, but it has really dropped off. I think the low cost of oil is driving down not only Houston now but Dallas as well to some degree.”
There was little movement among regions in April as the Mountain region remained at the top of the index, gaining 0.13 percent from March. Both were under 100 at this time last year. The Middle Atlantic and New England regions saw the best 12-month growth rates, at 0.77 percent and 0.57 percent, respectively. The Mid-Atlantic has increased 0.74 percent in 2016 and has moved up from last place at the end of 2015 to sixth place among regions. The West North Central was the only region below 100, likely due to the struggling energy sector.
Washington jumped above 104 on the index, with another sizable increase in April as it remains the top-ranked state index. Ranked third among states, North Carolina saw small business employment conditions continue to improve, as its index has climbed 1.72 percent so far in 2016. Up 2.29 percent from last April, New Jersey has the best 12-month growth rate among states, as its index is trending near a three-year high. Illinois has fallen to the bottom of the state ranking, with its fifth drop in the last six months and the largest year-over-year decline, of -1.82 percent, though the state’s total employment situation has improved this year.
“The Mountain and Northwest regions, and the South, continue to be pretty good,” said Mucci. “Housing in Florida and states in the South is still pretty strong. New York, New England and the Mid-Atlantic had a nice bump up over last year, but they had kind of a low point last year, particularly in the Atlantic City, New Jersey area. While they’ve had the nicest increases in the Northeast, in the Middle Atlantic, I think it’s been more of a recovery than anything.”
Specific industries showed little movement in April compared to March, with leisure and hospitality posting the strongest month, up 0.24 percent. Construction had the lowest one-month growth rate at -0.15 percent, but employment growth in that sector remains strong with an index level above 102. Education and health services maintained a solid start in 2016 as its index ticked up slightly to 101.16. Besides the top-ranked Other Services (except public administration) industry, Education and health services is the only other industry to show a positive year-over-year growth rate, 0.44 percent. At 98.84, manufacturing is down 0.63 percent during the last quarter and 1.14 percent during the last year, faring worst among the various industry sectors.
“Other Services still seems to be the strongest, which is personal care, including pet care and other discretionary income items,” said Mucci. “Leisure and hospitality had the best increase. The good news is that people feel like they can spend more. Lower gas and fuel prices probably help on that. That’s been very positive. Manufacturing is still at the bottom, and I think the strong dollar continues to hurt there.”
Paychex also found that part-time employment is up about 4 percentage points in recent years, making up nearly 10 percent of employment now. “From three years ago, it’s up 4 percentage points, so it’s a pretty big jump in part-time,” said Mucci.
Part-time job growth may be due to the rise of the so-called “gig economy,” along with a desire by many employers to avoid the extra cost of benefits such as health insurance and 401(k) matches.
“We’re still seeing, both by choice and not by choice, people are taking multiple jobs to give themselves flexibility in their work hours, but it’s also probably easier to find those jobs,” said Mucci. “The negative side of multiple part-time jobs is you’re not getting enough hours in one place to get the full benefits. Some businesses are doing that to avoid having the health care costs and some of the requirements from the Affordable Care Act.”
Accountants can advise their small business clients about how to deal with the impact of these trends, including new overtime rules that are expected from the U.S. Department of Labor this year. The Labor Department has reportedly lowered the salary threshold from $50,440 in the proposed rule to $47,000.
“We’re waiting for the final words to come out, but it looks like the threshold has now dropped down from $50,440 to $47,000,” he said. “That will help save some businesses from having the full increase of those costs in overtime. I think this is where accountants can help when the rules change like that. Many small businesses would not be aware at all as to what the rule change is, that there’s been a last-minute change. That could have a real impact on them. We’ve also seen that there’s a lot more enforcement of rules like that. There also appears to be increased regulatory scrutiny of employee scheduling—how are you scheduling people, are you giving them adequate time, do you have them come in but then make them go home because you don’t have enough work? A lot of those rules are starting to be scrutinized by the state attorneys general. I think small businesses could really use their accountants’ help on what are the rules, where do I have flexibility, and where do I not have flexibility?”
Other areas to watch for small business clients include minimum wage increases along with paid sick leave and family leave laws that are starting to be approved in various states and cities.
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