Small business jobs and wages held steady in January

Small business job growth and wage growth last month largely followed the same pattern as late last year, payroll company Paychex reported Tuesday.

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The Paychex Small Business Jobs Index, based on the payroll data of a subset of Paychex clients with fewer than 50 employees, increased 0.04 percentage points to 99.30 in January, while hourly earnings growth for workers stayed mostly unchanged since July 2025 at 2.68%.

“We enter ’26 on a similar path as ’25,” said Frank Fiorille, vice president of risk management, compliance and data analytics at Paychex. “For a really long time now, the index has been pretty flattish. It was up this month, which was nice to see it tick a little higher. But from an overall standpoint, it’s been under 100.”

However, he noted that Paychex has been seeing more positive signs in some of the larger business clients that it inherited from its acquisition of Paycor last April.  

Hourly earnings growth has remained below 3% since November 2024, including 2.68% in January. Weekly earnings growth slowed to 2.53% in January. The one-month annualized weekly earnings growth (1.62%) has been below 2% for the past three months. The last time one-month annualized weekly earnings growth was below 2% for three-straight months was in December 2020 during the pandemic, indicating few signs of wage inflation now.

The Midwest was again the top region for small business job growth for the 20th month in a row. Education and health services led the sectors for small business job growth for the 20th month in a row and has reported growth for nearly five years.

Given the recent start of tax season, accountants should advise their small business clients about the various changes from the One Big Beautiful Bill Act. “I still feel like a lot of small businesses aren’t up to speed or appreciate a lot of those changes that are out there,” said Fiorille. “They don’t even know about how they can take advantage of full expensing and some of the other things … that really could help small and medium-sized businesses.”

The new tax deductions for tips and overtime haven’t caused much of an issue yet for small business payrolls. Fiorille pointed out that business owners have a kind of safe harbor for right now, allowing them to make estimates. 

Separately, another payroll company, Gusto, reported its monthly jobs report for small businesses, indicating they added 37,100 jobs in January. Consumer-facing and health care businesses led the way on hiring. The health care industry added 17,100 jobs, while the hospitality and retail sectors saw strong gains as consumer spending held steady. On the negative side, professional and technical services lost 14,000 jobs.

The smallest businesses also struggled, according to Gusto. Companies with between one and four employees shed nearly 33,000 jobs, as larger small businesses continued to expand. Hiring was strongest in the Midwest and South, while small businesses in the West lost jobs overall.