Tight Labor Further Curbs Small Business Hiring

Growth in small business hiring continues to trail off as employers struggle to find skilled workers in a tight labor market.

The Paychex|IHS Markit Small Business Employment Watch’s monthly index dropped to 98.01, showing a 1.22% year-over-year decline. Hiring has been slowing since the second quarter of 2017.

A rating below 100 means hiring growth falls short of levels in 2004, a year considered normal for growth.

“Small businesses are adapting to the challenges of the tight labor market by increasing hours and earnings,” Martin Mucci, president and CEO of Paychex , a payroll and human resources services firm, said in a statement.

As a result, wages have been growing steadily, according to data Paychex aggregates from the payroll records of some 350,000 clients.

All industry sectors showed slower job growth last month. “Other services” — a catch-all category that includes the likes of dry-cleaning businesses, auto repair shops and personal care salon — continues to lead, but its index has dropped below 100.

Employment by small businesses tends to drive real estate needs of all kinds. But when hiring slows, businesses may hold off on expanding space if they can’t get the personnel to fill it.

There are still some hot spots for better-than-average small business job growth. The Dallas-area continues its long run as the top metropolitan area for small business job growth, sitting at or above 100 on the Paychex index for months. Phoenix, Arizona, came in behind Dallas last month and was the only other region above 100.

Among states, Dallas helped put Texas at the top of the list. Back in August, Tennessee moved to the lead, chiefly because of economic development in the Nashville area. Both states have stayed at the 100 mark or better consistently.