Small businesses added jobs last month at the fastest pace in at least eight years, according to payroll giant Paychex, with hourly earnings maintaining record growth as well.
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Despite the omicron variant, more businesses have been reopening and the economic recovery is continuing, bringing workers off the sidelines after the expiration of many of the pandemic relief programs that were put in place in 2020 and 2021, including the enhanced Child Tax Credit payments that ended in December.
At 101.33, the national Small Business Jobs Index increased 7.80% over the past year, surpassing its 2014 peak. “It reached a new record high,” said Frank Fiorille, vice president of risk management, compliance and data analytics at Paychex. “We surpassed our previous record high. This really measures the rate of change, so it’s not like a balance sheet point in time, but as far as what it measures, the 101.33 surpassed our 2014 peak. It keeps gradually going up a little bit month to month, as we see businesses are starting to bring back employees and hire new employees. Then the wages and compensation continue to rise with the index as well. When you dig deep under the hood and break it down, the leisure and hospitality sector has really been what’s powered the index. The wage growth has been really strong, as restaurants have to be really creative and do a lot of different things, paying bonuses and increasing wages just to get people to show up and to retain them.”
The omicron variant seems to have made an impact on the number of hours worked, where Paychex saw declines. “Especially in the leisure and hospitality sector, it was down almost 8%,” said Fiorille.
Job gains were broad-based across all regions of the U.S. in January, but the West led the way, improving for the eleventh month in row. Texas remained the top state for small business hiring while Dallas was the top metropolitan area, followed by Minneapolis.
New York City also had a good month in January as more patrons returned to restaurants. “We’re really seeing New York, especially New York City, really strong and coming back,” said Fiorille. “In the leisure and hospitality sector, it seems like they’re really hiring people, and the growth in that index has been particularly strong when you look at other metros, especially the last three months.”
Denver, Tampa, Miami and Phoenix led the way among the metro areas in terms of hourly earnings growth in January, all above 5%. Houston, however, ranked in last place among the metro areas, with hourly earnings growth at just 3%, but it was in first place among the various metro areas in weekly hours worked growth, at 0.71%. San Francisco, Detroit and Seattle, in contrast, all had weekly earnings growth below 3%, largely mainly due to a decrease in weekly hours worked.
Small businesses will be dealing with their taxes this month and consulting with their tax preparers in the months ahead as they try to deal with an overwhelmed IRS. “They suspended automated notices for related actions and some of the backlogs that you’re hearing about,” said Fiorille. “As you get into tax season, that’s something to watch and monitor.”
