Small business added jobs at slower pace in June

Small businesses with fewer than 50 employees continued to add jobs in June, albeit at a slower rate, but wage growth remained steady, payroll processor Paychex reported Tuesday.

The Paychex Small Business Employment Watch indicated hourly earnings growth held steady in June (3.16%) compared to May (3.13%). Weekly earnings growth (2.96%) improved for the third month in a row, but the increases have been marginal (0.03%).

In terms of jobs, California dropped to last place among the states in June and reported an index level below 100 for three straight months, indicating year-over-year job losses, mainly due to declines in the leisure and hospitality sector. 

The national jobs index continued to represent employment gains in June (100.29), though at a slower pace than May (100.58) and June 2023 (101.37).

“There’s still job growth, but clearly it’s decelerating,” said Frank Fiorille, vice president of risk, compliance and data analytics at Paychex. “Wages continue to come in at the softer number. Some of the things that the Fed has done on interest rates have definitely had an impact on that as well.”

“California was last in the index this month,” he continued. “Most of the big cities in California were also right at the very bottom. You dig deeper into that, and one of the big sectors was leisure hospitality, which ranked last in California as well.”

The two largest industry sectors nationally, education and health services (102.18) and professional and business services (100.20), increased their rate of small-business employment growth from last month in June.

Fiorille believes the enactment of recent regulations governing minimum wages and paid time off may be partly to blame at small businesses like restaurant franchises. He sees an impact for accountants and their small-business clients from a Supreme Court decision last week overturning the longstanding Chevron doctrine that gave precedence to federal agencies on regulatory interpretations of the laws passed by Congress. 

“More power is now going to go to the courts versus some of the agencies,” he said. “What does that do going forward as far as how agencies are going to issue guidance and regulate? Are you going to see less regulation? Is the small-business playing field going to be much much more competitive for small businesses? As you get closer toward the elections, they try to push through some legislation. There’s a lot of stuff we’re watching very closely and accountants should do the same.”