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SMB Hiring Growth Slows As Qualified Talent Proves Scarce

Small businesses (SMBs) are approaching the new year with only moderate hiring activity, according to the latest data released this week from Paychex and ADP.

Two separate reports from the payroll companies suggest small businesses in the U.S. slowed the growth of employment levels, with Paychex noting that job growth for 2017 is now at its slowest pace in six years.

The latest Paychex | IHS Markit Small Business Employment Watch report, which examines hiring activity among Paychex customers, found job growth decline 0.03 percent for the month of November, 0.1 percent for the quarter and 0.52 percent year over year. The small business statistics report marks the fifth month in a row that the index scored below 100, hitting 99.86 in November.

According to IHS Markit Chief Regional Economist James Diffley, the data suggests an ongoing trend.

“Though the monthly declines this year have been small, they have been persistent,” he said in a statement announcing the latest data. “At 99.86, the Small Business Jobs Index indicates employment growth, though steady, is now at the slowest pace since 2011.”

“Although we have seen slight monthly declines in employment growth, the rate of job growth, while still positive, has generally leveled off over the last quarter,” said Paychex President and CEO Martin Mucci in another statement.

Paychex also found wages among small business employers have seen similar declines in growth rate, with hourly wages’ growth declining to 2.77 percent in November.

In separate analysis released this week by ADP, analysts similarly described only “moderate” growth in small business hiring last month. SMBs — companies with between one and 49 employees — added 50,000 jobs in November, while October figures were revised to 67,000 jobs added — a 28,000 job decline from previous estimates.

According to news from the Associated Press, which covered ADP’s latest analysis, small business hiring has been “erratic” all year and has often been unable to keep pace with overall hiring trends. ADP found that companies across all sizes added 190,000 jobs in November, which reports described as a “strong” figure.

On average, SMBs added 58,000 new jobs a month for the first 11 months of 2017, the data show.

According to ADP Research Institute Vice President and Co-Head Ahu Yildirmaz, the numbers suggest a positive trend for the job market overall, though there is no guarantee it will continue.

“The labor market continues to grow at a solid pace,” the executive said. “Notably, manufacturing added the most jobs the industry has seen all year. As the labor market continues to tighten and wages increase, it will become increasingly difficult for employers to attract and retain skilled talent.”

The challenge of hiring professionals with the right skills could be attributed to small businesses’ own hiring struggles.

In a separate report, SCORE’s Megaphone of Main Street: Small Business Jobs Report for fall 2017 found that most small businesses surveyed (51.3 percent) said finding qualified job applicants is their largest hiring obstacle, while 55.5 percent said that challenge has gotten worse over the last six years.

Small businesses also signaled a greater willingness to try gig workers, SCORE found, adding that more than a third of SMBs said they have increased hiring of contractors or part-time workers.

Despite the slowdown in small business hiring, Paychex’s Mucci said there is room for optimism, especially when looking at regional trends.

“It is encouraging to see that hours worked in Florida are back on the rise after recent monthly slowdowns following hurricanes,” he said.

Paychex’s data found employment growth across the South as another promising factor, with the region now the nation’s only one with an index level above 100. Hiring in the Northeast increased, too, putting the region in second place for the first time this year, researchers said.

Similarly, according to SCORE, small businesses remain optimistic about their futures. More than two-thirds said they are optimistic about growth for the next six months.

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