No Clear View On Small Business Hiring Last Month

The latest analysis from two payroll providers, ADP and Paychex, present two varying pictures of small business (SMB) hiring for the month of February in the U.S.

ADP and Paychex released their latest analysis Wednesday (March 7), with ADP finding an uptick in hiring at businesses with fewer than 50 employees, while Paychex highlighted a slowdown in small business hiring.

As reported in The Washington Post, ADP’s employment report found SMBs with 49 employees or fewer added 68,000 jobs in February. That’s up from January’s addition of 63,000 jobs (which was revised from previous calculations of 58,000).

The stats add to more favorable news about U.S. hiring trends, with ADP also revising December hiring from 93,000 to 99,000 new jobs.

Despite the positive news, ADP also emphasized that small business hiring has failed to grow consistently over the last year or so. Still, the construction sector, hotels and restaurants and education and healthcare all saw strong job gains last month, analysts found.

Paychex, on the other hand, recorded a 0.11 percent decline in small business hiring growth in its Small Business Jobs Index for February. The analysis, part of the Paychex | IGH Markit Small Business Employment Watch report, also recorded a 1 percent decline in the small business hiring index compared to February 2017. The data suggests that small business hiring is growing, though at a slower pace than it was in previous months; the Paychex report does not calculate how many jobs small businesses added.

Still, ADP’s report signals a strengthening in SMB hiring from January to February, while Paychex’s analysis concludes a weakening of hiring activity.

“Last month we saw an uptick, and now this month we saw it come back down again,” said Paychex Vice President of Risk, Compliance and Data Analytics Frank Fiorille in a statement. “There’s still growth, but the growth is decelerating. It’s not as strong as it was early last year. We saw that in wages a little bit too.”


No Clear Trends

According to the Post, “surveys taken by banks and small business groups show no clear trends about owners’ hiring plans.”

The disparity between ADP’s and Paychex’s conclusions also highlights the struggle analysts face to offer a clear picture of small business hiring — and SMB trends overall. Reports said the clearest trend is a “shift in attitude” when it comes to the timing of new hires, with small businesses now delaying any hiring until after revenue growth; pre-Great Recession, the Post said, SMBs would add to staff levels in anticipation of that revenue.

Paychex, meanwhile, said that while small business job growth is slowing, this could lead to a focus on wage growth.

“The results of the Small Business Jobs Index over the past year are evidence of the tightening labor market,” said Paychex President and CEO Martin Mucci in another statement. “As the growth in jobs stabilizes because of challenges in finding qualified employees, we expect to see business owners making positive changes to wages and benefits to recruit and retain top quality talent.”

Paychex’s analysis found hourly earnings hit $26.41 across small business employees in February, a 2.67 percent increase from Feb. 2017.

Further, hiring trends are not consistent across all regions of the U.S. Separate analysis from ZipRecruiter released in February found that small businesses with 20 employees or fewer reported the strongest hiring activity in Kansas, Colorado and New Mexico. The weakest, the report found, was in New York, San Francisco and Pittsburgh.

But ZipRecruiter’s report warned that overall unemployment levels don’t correlate to small business hiring activity.

“The correlation with unemployment is tiny (.02) and statistically insignificant,” the report concluded. “Similarly, in the cities where applicants are more friendly toward small companies, it’s not because there’s a lower rate of small business failure or lower income or less affordable housing. It’s not desperation. It’s because people in these cities like to work at small businesses.”