Small business jobs and wages grew modestly in November

Last month brought a slight uptick in wage and job growth at small businesses in November, payroll company Paychex reported Tuesday.

The Paychex Small Business Employment Watch showed employment growth edging higher among businesses with fewer than 50 employees, with the Small Business Jobs Index component rising to 99.38 in November, up 0.11 percentage points from October. Meanwhile, hourly earnings growth increased marginally to 2.66%, but has stayed below 3% for 16 months ever since August 2024. The number of hours worked declined in November, however, after several months of growth.

“It was nice to see a little bit of an uptick in the index this month,” said Frank Fiorille, vice president of risk management, compliance and data analytics at Paychex. “The last few months we’ve seen the flagship index tracking down marginally. The one thing that we saw as a potential green shoot was the hours worked was up pretty dramatically over the last couple of months. The thought there was maybe that’s sort of a harbinger to employment growth. This past month, hours worked actually reversed course a little bit. But the index was up modestly.”

He speculated that businesses were trying to squeeze more out of their existing employees until they had more clarity on the tax bill, the government shutdown and the tariffs. “Maybe now you might see a little bit more robust hiring going forward with some of those things out of the way, and a little bit of confidence in the seasonal period here,” said Fiorille. “It will be interesting to see what happens next month.”

Wage growth has remained relatively stable at less than 3% in recent months, and there was little dramatic change in terms of states and industries in November. 

“The Midwest, from an overall standpoint, is still outperforming the two coasts, which is definitely a change over the last few years,” said Fiorille. 

The Midwest (99.79) remained the top region for small business employment growth for the 18th month in a row. Indiana (101.22) led all states in the jobs index in November, gaining 1.54 percentage points during the past quarter. Phoenix (100.34) topped the other metro areas in terms of employment growth, followed by Philadelphia (100.32) and Dallas (100.11).

Education and health services (100.64) led the way among industry sectors for small business job growth for the 18th month in a row. Manufacturing slowed by 0.73 percentage points to 98.32 in November, putting it in last place among the various sectors.

Accountants and tax professionals are watching closely as more guidance emerges from the Treasury and the Internal Revenue Service on various provisions of the One Big Beautiful Bill Act, such as the deductions for tips and overtime pay, after the federal government has reopened. 

“As more guidance starts to trickle out, what does that mean from an execution standpoint?” said Fiorille. “Now that they are back open, hopefully we’re going to start getting some more guidance and information on what’s going on.”