Small Business Wage Growth Gains Momentum, Job Growth Holds Steady in October

Small business hourly earnings growth hit 3.00 percent in October

The tight labor market positively impacted wage growth in October, according to the latest Paychex | IHS Markit Small Business Employment Watch. Hourly earnings are on the rise, reaching 3.00 percent ($0.80) growth in October. Additionally, after hovering just above two percent to start the year, weekly earnings growth has quickly improved to 3.36 percent as month-to-month gains grow larger. At 98.14, the national jobs index remains essentially the same as last month (98.22).

“There was little change in the jobs index in October, but hourly earnings growth continued to accelerate, and weekly earnings gains reached a new series high, 3.36 percent,” said James Diffley, chief regional economist at IHS Markit.

“The recruitment and retention challenges presented by this tight labor market are becoming more noticably reflected in employees’ paychecks,” said Martin Mucci, Paychex president and CEO. “We anticipate wage growth will continue as employers work to attract and keep top talent.”

Broken down further, the October report showed:

• The South remains first among regions in employment growth; the West retained its lead among regions in wage growth.
• Tennessee remains the leader among states in small business job growth; New York took the top spot among states for wage growth.
• Dallas is again the top metro for job growth; Los Angeles became the leading metro in wage growth.
• Leisure and Hospitality reached 5.00 percent hourly earnings growth in October, best among industry sectors.

The complete results for October, including interactive charts detailing all data at a national, regional, state, metro, and industry level, are available at www.paychex.com/employment-watch. Highlights are available below.

National Jobs Index

• Giving up a portion of its September gain, the pace of small business job growth remains a percentage point below a year ago.
• At 98.14, the jobs index has remained essentially flat since July’s 98.18.

National Wage Report

• Hourly earnings growth continued its acceleration in 2019, reaching 3.00 percent in October.
• One-month annualized growth for hourly earnings hit nearly four percent in October.
• Just above two percent to start the year, weekly earnings growth has quickly improved to 3.36 percent as month-to-month gains grow larger.

Regional Jobs Index

• At 98.97, the South was the only region to improve in October, gaining 0.04 percent and expanding its lead among the other regions.
• The West has declined 0.38 percent during the past quarter and 1.49 percent during the past year, representing the weakest growth rates among regions.

 Note: Percentages displayed in the regional heat map reflect 12-month changes.

Regional Wage Report 

• All regions saw accelerated wage gains in October.
• The West continues to lead hourly earnings growth among regions, at 3.45 percent, though the Northeast is closing the gap with a strong 3.22 percent surge in October.

Note: Percentages displayed in the regional heat map reflect 12-month changes.

State Jobs Index

• Texas dropped sharply in October, to 99.49, leaving Tennessee as the only state index above 100.
• Down 0.43 percent from last month and 2.72 percent from last year, employment growth has slowed significantly in Washington, which now ranks only ahead of New Jersey among states.

Note: Analysis is provided for the 20 largest states based on U.S. population.

State Wage Report

• New York leads states in hourly earnings growth (4.12 percent), followed closely by Illinois and California.
• Indiana lags in hourly earnings growth at 1.27 percent, though Texas and Maryland are also reporting less than two percent gains.

Note: Analysis is provided for the 20 largest states based on U.S. population.

Metropolitan Jobs Index 

• At 100.65, Dallas remains the only metro index above 100, though it has fallen 2.10 percent during the past quarter.
• Employment growth in Minneapolis declined sharply in October, to 98.01.
• Up 2.04 percent from last year, Philadelphia has the best 12-month growth rate and ranks third among metros at 99.35.

 Note: Analysis is provided for the 20 largest metro areas based on U.S. population.

Metropolitan Wage Report

• Two California metros, Los Angeles (4.43 percent) and San Diego (4.41 percent), lead gains in metro hourly earnings.
• Tampa and Minneapolis are the only two metros with hourly earnings growth below two percent.
• Pairing more hours worked and a higher hourly rate, weekly earnings growth is surging in San Francisco, reaching six percent in October. 

Note: Analysis is provided for the 20 largest metro areas based on U.S. population.

Industry Jobs Index

• Trade, Transportation, and Utilities slipped further in October to 96.41, just ahead of the last-ranked sector, Manufacturing (96.39).
• Education and Health Services is the only sector to post a year-over-year increase, a modest 0.02 percent.

Note: Analysis is provided for seven major industry sectors. Definitions of each industry sector can be found here. The Other Services (excluding Public Administration) industry category includes religious, civic, and social organizations, as well as personal services, including automotive and household repair, salons, drycleaners, and other businesses.

Industry Wage Report  

• Leisure and Hospitality reached 5.00 percent hourly earnings growth in October, best among sectors.
• Manufacturing improved to 5.09 percent weekly earnings growth, continuing the recent trend of strong wage growth paired with slower job growth in the sector.
• Education and Health Services ranks last among industry sectors, at 1.26 percent hourly earnings growth.

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