SurePayroll's Small Business Scorecard Review
Here's what's happened in the small business economy this past month, based on payroll data for our over 15,000 small business customers.
The small business economy appears to have pressed the "pause" button. Year to date, through February 28, we've seen zero national growth in small business hiring. In effect, the average small business size hasn't changed since the end of 2004. If there's job growth in the economy, it's coming from large companies, not small businesses.
Small business salaries are also flat. The SurePayroll Pay Index is down 0.7% year-to-date. This may suggest that downward pressures on small business salaries, which we saw throughout 2004, are finally dissipating a bit. In fact, the 0.7% drop through February tracks to a straightline projection of an annualized salary drop of 4.0%. That would be quite remarkable, given that we saw small business salaries drop 4.8% in 2004. SurePayroll predicts a 3.0% decline in average paychecks for 2005. At this rate, we will miss the mark by a bit.
One possible explanation? In talking to our customer base, we seem some small business employees transitioning back to larger companies. For these employees, working at a small company was a temporary solution to unemployment that resulted from the dip in the economy.
Now that the economy is recovering, they have better opportunities. This is resulting in attrition in small business employee counts. A small business may hire a new employee but lose another employee to a better job at a large company. In turn, new employees are more expensive because the small businesses are starting to have to compete more with larger companies that are hiring. This would explain why we see a slowdown in salary deflation in our data.
On a regional basis, small business size is trending down in the Midwest and the West year to date, is flat in the south, and is increasing in the Northeast.
Looking at average paycheck size, paychecks were mixed on a regional basis but were flat compared to last year's deflationary trend. Paychecks were down 0.2% in the Midwest; down 0.9% in the West; up 0.4% in the Northeast; and up 0.7 % year-to-date change in the South.
At the state level, as depicted in the graphic below, results were mixed. We track data in all fifty states but we pay close attention to 21 states that we have earmarked as "benchmark states": Arizona, California, Colorado, Florida, Georgia, Illinois, Indiana, Maryland, Michigan, Minnesota, Nevada, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Texas, Utah, Virginia, and Washington.
Year to date, salaries are up in 10 of our 21 benchmark states. Firms grew in size in 12 of our 21 benchmark states.
Data for our benchmark states is available – just send me an email and let me know if you want the data for your state.
I welcome any and all questions or suggestions regarding our Small Business Scorecard initiative. Feel free to contact me at malter@surepayroll.com or by phone at (847) 676-8420 ext. 7229.
Best regards,
Michael Alter
President
SurePayroll, Inc.
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