Small-business employment grew in June

Small businesses continued to ramp up their hiring this month, particularly in the leisure and hospitality sector, as the economy recovers from the pandemic, according to payroll giant Paychex.

The Paychex | IHS Markit Small Business Employment Watch, released Tuesday, found small-business employment growth increased 0.26% in June. The related Small Business Jobs Index grew 4.53% in the second quarter of 2021. Hiring in the leisure and hospitality sector grew 12.65% in the second quarter. Hourly earnings growth grew slightly, from 2.82% in May to 2.84% in June.

Thanks to the wide availability of vaccines, more parts of the country have been rolling back restrictions on businesses, even though low vaccination rates in some states are leading to the spread of the more transmissible Delta variant.

“Things are clearly opening up more, and people are going back to work,” said Frank Fiorille, vice president of risk management, compliance and data analytics at Paychex.

The leisure and hospitality sector has rebounded strongly in recent months as more restaurants and bars reopen and increase their capacity limits. But many businesses are still having trouble luring back employees, with many people remaining fearful of infection, having childcare issues, or continuing to rely on expanded unemployment benefits that pay more money than minimum wage and tipped wages in many states. As a result, employers in the leisure and hospitality industry have needed to increase wages to attract workers.

“When you really look under the hood and dig down deep under the numbers, there’s very strong wage growth in that sector,” said Firoille. “Businesses are able to pay employees more money to come back to work, so we are seeing it in the data.”

Some states have decided to end the $300 boost from the federal government to unemployment benefits before the program expires in September as a way to bring employees back to work. “The unemployment benefit extension, depending on what state you’re in, is going to come to an end in September,” said Fiorille.

The construction industry is being held back by supply chain issues despite the increases in housing prices, although prices for lumber are starting to come down.

“On the other side of it, a sector that underperformed continues to be construction,” said Fiorille. “We saw that last month and then again this month, it was actually down a little bit, so it came back somewhat from last month, but still down. That had been the strongest sector for a very long time, and the correlation we think about is the supply chain and trade issues are suppressing that sector.”

The South continues to lead among regions of the country in terms of small-business job growth in June, with job growth in North Carolina spiking 6.36% in the second quarter. In terms of metropolitan areas, Tampa led the way on job growth.

Hourly earnings growth in the West was 3.18%, the strongest among the different regions, while hourly earnings growth in the Northeast slowed to 2.93% in June. Missouri led the states in hourly earnings growth again in June at 4.09%, followed by Massachusetts at 3.57% and California at 3.54%. Illinois ranked in last place among states in hourly earnings growth at 1.7%, and weekly earnings growth at 0.85%. Georgia remained the top state for weekly earnings growth at 3.96%.

Accountants should keep their small business clients informed about the latest developments in Washington. While the Paycheck Protection Program has expired, employee retention credits remain available to businesses. The infrastructure plan that the Biden administration is trying to pass with a bipartisan group of senators promises to yield more jobs for small businesses if it gets passed.

“There’s still a lot of dynamic stuff, depending on what industry and what state you operate in and what business,” said Fiorille. “You’ve got to keep in tune with what is happening because there is a lot going on.”