Small business added jobs in June as wages remained flat

The pace of job growth at small businesses with fewer than 50 employees improved for the fourth consecutive month in June, according to payroll provider Paychex, but hourly earnings growth has stayed below 3% for the 20th month in a row.

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The Paychex Small Business Employment Watch, released Tuesday, found the biggest increases in employment in the West region (1.22 percentage points) and the leisure and hospitality sector (1.68 percentage points. 

“It was really broad based,” said Frank Fiorille, vice president of risk management, compliance and data analytics at Paychex. “Most of the regions were up, and most of the disciplines were up too, so it was really nice to see that continuing trend for four straight months. We haven’t seen that since November 2020.”

Education and health services topped the sectors for small business job growth in June, while a one-month surge in leisure and hospitality helped lift the industry’s jobs index level (99.55) to a two-year high.

“We continue to hear that there’s some softness in small business hiring for teenagers for some of the summer seasonality jobs,” said Fiorille. “It was interesting, though, to see the leisure and hospitality jump up.”

However, hourly earnings growth for U.S. workers remains below 3% (2.80%). Weekly hours worked (0.14%) continued to trend positively for the fourth month in a row, as weekly earnings growth in June reported 2.80%.

The U.S. Bureau of Labor Statistics’ latest Job Openings and Labor Turnover Survey indicated that the number of job openings in May reached 7.6 million, while the number of hires also remained essentially unchanged at 5.2 million, as did separations at 5.1 million, including quits (3.1 million), layoffs and discharges (1.7 million).

Fiorille noted that corporate layoffs seem to be leading to more small businesses being formed. “New business formation is at some pretty high levels, which is something we also track and watch closely,” he said. “We think some of that has to do with AI. It’s easier to start up your own small business, but also many times when you see big corporations have layoffs, then people start up their own gig company as well.”

Indiana reclaimed its role as the top state for small business employment growth, which it has held for nine of the last 24 months.California’s jobs index gained more than two percentage points during the past quarter to land above 100 in June. a first since March 2024.

Fiorille advises accountants to keep an eye on any upcoming legislation coming out of Washington on artificial intelligence and budget reconciliation. He also noted that approximately 65 to 70 changes will be occurring in July at the state level in areas such as minimum wages and family and medical leave rules.