Small Business Hiring Rises for Biggest Gain in Three Years

In the face of continuing talk of an economic slowdown, small business hiring recorded its biggest positive pop in three years, according to the most recent monthly report from payroll company Paychex.

Percentage-wise, the pop last month was perhaps more significant in its direction than its size. The Paychex|IHS Markit Employment Watch’s index jumped 0.21% to 98.22, marking the first increase since February. But it’s still a percentage point lower than this time a year ago.

"It remains to be seen whether this one-month change marks a turning point,” James Diffey, IHS Markit’s chief regional economist, said in a statement.

Paychex culls the data from approximately 350,000 clients that employ 50 or fewer people. The index has been generally declining since 2017 when it was last above 100. A rating below 100 means hiring is growing at a slower pace than hiring in 2004, a year considered normal growth. Hiring rates can signal where the real estate market may be headed.

With a tight labor market, small businesses have struggled to find skilled workers to fill open positions. Still, last month, manufacturing hiring had the biggest jump in September, though it sits at the bottom of industry performance index with a rating of 96.39. Other services, a catch-all category for everything from dry cleaners to nail salons to dating services, remains at the top for hiring growth at just above 100.

Hiring has been stronger in different pockets around the country. In the latest index, the Dallas metropolitan area remained at the top and was the only region above 100.

The area’s real estate market is one of strongest in the country. It’s second to the New York City metropolitan area in leasing office space, for example, with 5.1 million square feet filled over the past year above what tenants have vacated, according to CoStar data.

All of Texas is above 100 on the index. But the state trails Tennessee’s hiring growth for the second consecutive month.

The Nashville metropolitan area is the key driver for the Volunteer State. The area has become one of the hottest cities in the country given the arrival of major corporate citizens. The recent notables include financial management firm AllianceBernstein’s headquarters and an eventual Amazon operations center promising at least 5,000 new jobs.