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 a case of the summer doldrums.
Economic factors — such as rising energy prices, a widening trade deficit, and increasing interest rates — may be contributing to a slowdown, but many small businesses we've talked to are simply finding that it's tough to track down prospective customers in the late summer months.
For many, summer is a time for vacations and taking it easy. Many buying decisions are on hold until the bosses return. For those small businesses that don't cater to vacationers, this translates into a slowdown in business. That in turn translates to a slowdown in hiring, which is precisely what we see in our Scorecard data this month.
The Scorecard hiring index ended the month of July at 10,477 nationwide. That's a 0.1% increase from where we were at the end of June, suggesting a very slight uptick in hiring last month.
Five Straight Months of Increased Hiring
On the bright side, that's five straight months of increased hiring. In fact, we've only had one down month
in the past sixteen months. While that's good news and it suggests that the economic recovery is chugging
along, the magnitude of growth is less than desired.
For 2005, our year-to-date growth number for small business hiring is 0.4%. That tracks to an annual growth in small business hiring of just under 0.7% for 2005.
In 2004, we saw small business hiring increase by 4.4%. In 2005, we are moving forward, but it's entirely possible that we are simply coasting along in neutral and that the car is out of gas. To find out, we'll just have to wait and see how the rest of 2005 pans out.
Salaries Continue to Recover
Small business salaries had been on a steady decline for the first five months of the year but we have now
recorded two straight months of payroll increases. That's good news for small business employees. It's
probably good news for everyone as it mitigates the risk of widespread salary deflation, which, like rampant
inflation, can take a terrible toll on any economy.
The SurePayroll Pay Index rebounded to 935 in July. It had been at 931 at the end of June, suggesting a small increase in salary levels across the nation.
July's 1.8% year-to-date salary drop translates to an annualized decrease in salaries of 3.0%. That's a big change from the June numbers which showed salary decreases tracking at 4.46% for the year. In 2004, average check size dropped by 4.8%.
Independent Contractor Roller Coaster Ride
Up, down, up, down. That's been the pattern the past four months for the SurePayroll Contractor Index, which
tracks how reliant small business are on independent contractors. As of the end of July, the SurePayroll
Contractor Index stands at 3.28%. That means that for every 100 workers engaged by small business, 3.28 are
1099 independent contractors and 96.72 are W2 employees. Despite the statistical roller ride of the past
few months, use of contractors is generally on the rise relative to prior months. One year ago, our contractor
metric was at 3.1% and at the end of 2004, the metric clocked in at 3.20%.
Regional and State Performance
On a regional basis, the hiring story has been the same for the past three months. Small business size
trended down in every region except the Northeast.
On the salary front, the South, which prior to last month had been the only region where the average small business paycheck was up for the year, has been joined by the Midwest, which is all in positive territory for the year. Salaries remain down year to date in the Northeast and the West.
As depicted in the graphic below, results varied from state to state. The Scorecard comprises data from 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 11 of our 21 benchmark states, the same number as in the previous month. Year to date, firms grew in size in 11 of our 21 benchmark states, again the same number of "up" states we saw at the end of June.
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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