Small biz sees modest growth in jobs, pay

Small business jobs growth remained steady in November, while workers' wages grew only slightly, payroll provider Paychex reported Tuesday.

The Paychex Small Business Employment Watch found hourly earnings growth of 2.97% and weekly earnings growth of 2.84% for workers. Job growth occurred in the areas in the Southeast affected by recent Hurricanes Helene and Milton. Construction job growth in Florida increased 2.55 percentage points to an index level of 99.95. Weekly hours worked in North Carolina (-0.81%) were down in November, but one-month annualized growth rebounded among sectors following Hurricane Helene.

"The states that were impacted by the hurricanes took a pretty big dip right after that happened," said Frank Fiorille, vice president of risk, compliance and data analytics at Paychex. "But that's usually the case that we've seen for many of these sorts of events that it bounces right back quickly."

Texas gained 1.22 percentage points as its jobs index climbed to 101.60, which led states for job growth in November. Dallas (101.07) and Houston (100.94) ranked first and second, respectively, among top U.S. metros for job growth in November.

The Midwest (100.62) remained the top region for small business employment growth for the sixth consecutive month.

Hourly earnings growth in Tennessee (3.98%) ranked first among states in November, marking the first time Tennessee has ranked first since reporting began more than 10 years ago.

Probably due to workforce composition changes due to recent hurricanes, Tampa (4.84%) jumped to No. 1 among the top U.S. metropolitan areas for hourly earnings growth in November.

"If you look at the sectors, the leisure and hospitality sector is the softest," said Fiorille. "The construction and professional business discipline was up the most this past month. Wages are still under that 3% number. We haven't seen much of a jump on that."

Paychex has also been tracking numbers for workers who switched jobs or stayed at their jobs. It saw a large jump in pay for those who switched jobs early in the pandemic, but the differences in pay compared to those who remained at their jobs have narrowed in recent years. 

"Especially during COVID, when the labor market was really tight, it was a pretty big gap," said Fiorille. "People who switched jobs were seeing a pretty big increase in wages. We're seeing that really compressed to where now there's almost not much of a gap at all, which validates that the labor market, while still being strong, has definitely cooled a little bit from the last few years."

He thinks accountants should keep their small business clients informed about the possible tax changes that may occur next year when the Trump administration takes office in Washington. Other important topics include artificial intelligence, privacy and beneficial ownership information reporting.

Small businesses should also be aware that the Biden administration's expanded overtime rule was struck down in a federal court in Texas in November. The rule would have made an estimated 4 million more people eligible for overtime pay, but the judge ruled that it improperly made overtime dependent on their wages and not their job duties.

Under the rule, starting Jan. 1, 2025, most salaried workers who make under $1,128 per week, or $58,656 per year, would become eligible for overtime pay. The rule temporarily raised the threshold on July 1, 2024 to salaried workers who earn under $844 per week, or $43,888 per year. Overtime pay will now revert to the old level of $684 per week, or $35,568 per year, which was set in 2019 under the first Trump administration after another federal judge struck down a more expansive rule from the Obama administration.

The Department of Labor is appealing the judge's decision, but it will be up to the incoming Trump administration and its nominee for Secretary of Labor to decide whether to continue to appeal or to set another overtime rule. 

"It does really impact a lot of businesses," said Fiorille. "We'll see what happens."