Small business employees earned by working more hours in October

Hourly earnings growth for small business employees slowed slightly last month, but the average number of hours they worked increased, driving up their weekly earnings, payroll company Paychex reported Tuesday.

The Paychex Small Business Employment Watch, based on companies with fewer than 50 employees, found weekly hours worked rose across all regions of the U.S. in October. While hourly earnings growth for U.S. small business workers slowed marginally to 2.58%, staying below 3% for the past 15 months, small business employees experienced an increase in their weekly earnings due to the greater number of hours they worked during the month. 

National weekly hours worked growth increased 0.44% in October, the strongest gain since April 2021, when it was 0.78%. All regions recorded positive 12-month weekly hours worked growth in October, with one- and three-month annualized growth rates over 1%. Weekly earnings growth increased nationally to 2.94% in October, marking the highest level since January 2024. when it was 3.07%.

“This month, what really stood out to us was that pretty big increase in hours worked,” said Frank Fiorille, vice president of risk management, compliance and data analytics at Paychex. “It’s really the strongest gain we’ve seen since back in April 2021, and it was across the board. It’s been two pretty strong months of hours worked.”

This may be a leading indicator of the hiring trends over the next few months, he noted, as some Federal Reserve studies have shown that if business is getting better, then companies will try to squeeze out more hours with their existing staff. If sentiment remains positive, then the next step will be to do more hiring. 

The report’s Small Business Jobs Index has moved less than one percentage point over the past year, however, pointing to continued moderation in small business hiring. The Midwest remained the top region for small business employment growth for the 17th month in a row.

The U.S. Bureau of Labor Statistics won’t be issuing its traditional monthly jobs report on Friday due to the government shutdown, and that has been driving more interest in reports from payroll companies such as ADP and Paychex to help fill in the gap. ADP recently decided to start issuing reports on private company hiring on a weekly basis to provide more information to economists and analysts. Paychex has been noticing more interest in its data as well.

“It definitely seems like we have a lot more people calling,” said Fiorille. “I was on a couple calls with some folks from D.C. yesterday. There is that gap we’re trying to hopefully help fill in a little bit.”

For this month, he believes accountants and their small business clients should be paying attention to the ongoing shutdown and the impact on the Internal Revenue Service as it works to produce guidance on the tax changes in the recently passed One Big Beautiful Bill Act.

“With the IRS, even though they’re sort of open, but not open, we’re still relying on them to provide some guidance on the tax bill, the OBBBA, and how that’s being impacted,” said Fiorille.