Job Market Remains Stable, Wage Growth Drops Below Four Percent

Small Business Jobs Index remains relatively flat from January 2023

According to the Paychex | IHS Markit Small Business Employment Watch, hourly earnings growth (3.95%) has dipped below four percent for the first time since 2021, and one-month annualized growth in hourly earnings remains below four percent for the fourth consecutive month. Small business job growth is essentially unchanged in July from June. Currently at 99.14, the national Small Business Jobs Index — which measures the rate of small business job growth in the U.S. — has remained between 99 and 100 for the past year, representing moderate job growth for the year.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20230801701980/en/

The July Paychex | IHS Markit Small Business Jobs Index shows declines in wage inflation and a steady job market. (Graphic: Business Wire)

“Job growth remains relatively flat while wage growth is moderating after its inflation-fueled acceleration last year,” said James Diffley, chief regional economist, S&P Global Market Intelligence. “Both of these factors signal a stable economy not heading toward a significant downturn.”

“Our latest jobs data shows a resilient labor market for small businesses,” said John Gibson, Paychex president and CEO. “Wage inflation continues to decline, while the labor market remains tight for small businesses and their employees.”

In further detail, the July report shows:

• Hourly earnings growth moderated, dropping 0.07% (to 3.95%) and falling below four percent for the first time in more than two years.
• Weekly earnings growth slowed to 3.71% in July, its fifth consecutive month in decline. One-month annualized growth has been below three percent for the past four months
• The South continues to lead small business employment growth among regions for the 16^th consecutive month, but the West was the only region to see small business jobs growth increase in July.
• Job growth in leisure and hospitality slowed by 0.39% to 99.24, yet its hourly earnings growth (5.15%) ranks first among sectors.
• Texas leads states in both small business job growth and hourly earnings growth with a July jobs index of 100.87 and hourly earnings growth standing at 4.80%.

Paychex 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.

The complete results for July 2023, including interactive charts detailing all data, are available at www.paychex.com/watch. Highlights are available below.

July 2023 Paychex | IHS Markit Small Business Employment Watch

National Jobs Index

• At 99.14, the national Small Business Jobs Index slowed slightly for the fourth consecutive month and is down 1.00% from last year.
• Small business job growth moderated 0.07% from last month as its modest gains held relatively steady in July.
• The average pace of small business growth for the year leading up to the pandemic (March 2019 – February 2020) was 98.33, nearly a full point lower than the current pace.

National Wage Report

• Hourly earnings growth (3.95%) is below four percent for the first time since 2021.
• Weekly earnings growth slowed to 3.71% in July, its fifth consecutive month in decline. Weekly earnings’ one-month annualized growth has been below three percent for the past four months.
• Weekly hours worked growth is -0.20% in July, with one-month annualized growth averaging -1.84% since March 2023.

Regional Jobs Index

• At 99.91, the South leads regional small business job growth for the 16^th consecutive month despite its index falling below 100 for the first time in two years.
• The West was the only region to improve its rate of small business job growth, gaining 0.16% to 98.89.

Regional Wage Report

• At 4.20%, the West leads regional hourly earnings growth in July. The West also has the strongest weekly earnings growth (3.98%) among regions.
• For the fifth consecutive month, the Midwest leads regions in weekly hours worked growth (-0.11%). However, the Midwest has the weakest earnings growth rates among regions.

State Jobs Index

• Texas (100.87) overtook North Carolina (100.78) for the highest state index in July. Texas has been among the top three states for small business job growth since September 2020.
• New York has the weakest jobs index (98.03) and has slowed the most during the past year (-2.48%) among the top 20 most populous states.
• At 98.83, job growth in California has increased each of the past three months for a quarterly gain of 0.61%.

State Wage Report

• At 4.80%, Texas leads states in hourly earnings growth for the fifth straight month, though growth has steadily slowed in 2023. Hourly earnings growth averaged 6.34% during the second half of 2022.
• Indiana (2.87%) is the only state with hourly earnings growth below three percent in July.
• Washington ranks second in hourly earnings growth (4.71%), but 17^th in weekly earnings growth (3.39%) among states due to a large decrease in weekly hours worked. 

Metropolitan Jobs Index

• Houston (101.85) remains the top-ranked metro for job growth for the ninth consecutive month, nearly one point higher than second-ranked Miami (100.86).
• Riverside has gained nearly two percent through seven months in 2023, improving its Small Business Jobs Index to 98.82 and rising out of the bottom rank among metros for the first time since last year.
• Denver dropped 0.67% to 97.28 in July, ranking last among top-ranked metros.

Metropolitan Wage Report

• San Diego leads the nation’s top metros in hourly earnings growth (4.98%), with Riverside (4.90%), another California metro, just behind it.
• San Francisco (2.69%) is the only metro with hourly earnings growth below three percent in July.
• Miami has the strongest weekly hours worked growth (0.32%) among top metros.

Industry Jobs Index

• At 100.74, education and health services is up 0.70% from last year, the best 12-month change rate among sectors.
• Leisure and hospitality slowed 0.39% to 99.24 in July and now ranks fourth among sectors in job growth, its lowest ranking in two years.
• Manufacturing’s Small Business Jobs Index slowed to 97.03 in July, continuing its year-long run as the last-ranked sector.

Industry Wage Report

• At 5.15%, leisure and hospitality’s hourly earnings growth ranks first among sectors and is on the rise. One-month annualized earnings growth (6.57%) in the sector is at its highest level in 2023 so far.
• Construction’s hourly earnings growth moderated to 4.51%, but the sector still ranks second among sectors again in July.
• Other services (3.16%) and education and health services (3.55%) have the weakest hourly earnings growth among sectors. However, these sectors have the month’s strongest jobs indices.

For more information about the Paychex | IHS Markit Small Business Employment Watch, visit www.paychex.com/watch and sign up to receive monthly Employment Watch alerts.

*Information regarding the professions included in the industry data can be found at the Bureau of Labor Statistics website.

About the Paychex | IHS Markit Small Business Employment Watch 

The Paychex | IHS Markit Small Business Employment Watch is released each month by Paychex, Inc., a leading provider of payroll, human resource, insurance, and benefits outsourcing solutions for small-to medium-sized businesses, and S&P Global Market Intelligence, a Division of S&P Global (NYSE: SPGI), which merged with IHS Markit in 2022 and is a provider of information services and solutions to global markets. Focused exclusively on small business, the monthly report offers analysis of national employment and wage trends, as well as examines regional, state, metro, and industry sector activity. Drawing from the payroll data of approximately 350,000 Paychex clients, this powerful tool delivers real-time insights into the small business trends driving the U.S. economy.

About Paychex 

Paychex, Inc. (Nasdaq: PAYX) is an industry-leading HCM company delivering a full suite of technology and advisory services in human resources, employee benefit solutions, insurance, and payroll. The company serves approximately 740,000 customers in the U.S. and Europe and pays one out of every 12 American private sector employees. The more than 16,000 people at Paychex are committed to helping businesses succeed and building thriving communities where they work and live. To learn more, visit paychex.com and stay connected on Twitter and LinkedIn.

About S&P Global Market Intelligence 

At S&P Global Market Intelligence, we understand the importance of accurate, deep and insightful information. Our team of experts delivers unrivaled insights and leading data and technology solutions, partnering with customers to expand their perspective, operate with confidence, and make decisions with conviction.

S&P Global Market Intelligence is a division of S&P Global (NYSE: SPGI). S&P Global is the world’s foremost provider of credit ratings, benchmarks, analytics and workflow solutions in the global capital, commodity and automotive markets. With every one of our offerings, we help many of the world’s leading organizations navigate the economic landscape so they can plan for tomorrow, today. For more information, visit www.spglobal.com/marketintelligence.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230801701980/en/