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.
Small business hiring is flat as a pancake.
The Scorecard hiring index ended the month of June at 10,466 nationwide. That's exactly where we were at the end of May, suggesting a sluggish small business economy with little to no growth in hiring.
With no increase in hiring in June relative to May, our year-to-date growth number for small business hiring remains the same, a paltry 0.3%.
If the second half of the year proves to be no different than the first, we will end up with annual growth in small business hiring at just under 0.6% in 2005, a somewhat worrisome figure given that small businesses are believed to create seventy five percent of new jobs.
This projection for 2005 suggests a dramatic slowdown from last year. In 2004, we saw small business hiring increase by 4.4%. Those strong 2004 results in our data are consistent with other economic reports. Economists generally agree that 2004 was the strongest year for job creation since 1999.
The strong performance in 2004 for job creation was primarily a result of the optimism for economic turnaround and increased consumer spending that was fueled by the 2003 tax cuts. However, it appears that the tax cut stimulus was short-lived.
Today, small businesses assessing the economy are confronted with lingering terrorism issues, higher oil and gas prices, rising interest rates, competition from increased global outsourcing, and high healthcare insurance costs. On the bright side, small business owners can take comfort in rising consumer confidence and rising housing values (albeit in the context of an ongoing debate over whether the US is in the middle of a housing bubble).
All of these factors make small businesses cautious in hiring. In our data, we've seen increased hiring for most of the year, but the pace of growth is incredibly slow.
Slowdown in Salary Slide
Small business salaries recovered some positive ground for the first time this year. Small business
salaries have been on a steady decline all year but this month salaries rose on average. The SurePayroll
Pay Index rebounded to 931 in June. It had been at 930 at the end of May, suggesting a small increase
in salary levels across the nation.
June's 2.26% year-to-date salary drop translates to an annualized decrease in salaries of 4.46% if the rate of decline is the same in the second half of the year. Last year, average check size dropped by 4.8%. Salary statistics are a mixed bag. Lower salaries are in theory good for small business owners as they can hire new employees at lower costs and achieve higher profitability. However, when salaries decline across the country it can put negative pressure on consumer confidence and consumer spending, which in turn negatively affects the overall small business climate.
Free Agent Economy
Last month, we reported that after sixteen consecutive months of increased use of independent
contractors by small businesses, the Scorecard finally saw a decrease in the use of contractors in May.
However, in June our SurePayroll Contractor Index bumped back up to the same level we saw in April 2005.
Regional and State Performance
On a regional basis, the story for June was identical to the story for May. Small business size
trended down in every region except the Northeast. On the salary front, the South retains bragging
rights as the only region where the average small business paycheck is up for the year.
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, up from 8 in the previous month. Year to date, firms grew in size in 11 of our 21 benchmark states, the same number of "up" states we saw at the end of May.
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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