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 Owners Wobble But They Don't Fall Down
Hurricane Katrina and Rita have taken their toll on the small business economy.
After six straight months of increased hiring, the small business economy reversed course
in September and we saw a decline in hiring.
The Scorecard hiring index ended the month of September at 10,480 nationwide. That's a 0.13% decrease from where we were at the end of August, indicating a moderate decline in small business hiring last month.
We've only had two down months in the past twenty months, so there's no big cause for alarm. If we see five or six months in a row of decreased hiring going forward, that will be the time to start worrying.
For now, things are OK in the small business economy. In the face of massive hurricane damage, lower consumer confidence, lingering war and terrorism concerns, dipping consumer spending, higher fuel prices, soaring natural gas costs and numerous other negative factors, the small business economy is chugging along.
That's important because small businesses represent more than 99.7% of all employers. They employ more than half of all private sector employees. They pay 44.5% of total U.S. private payroll, and they generate 60 to 80% of net new jobs annually.
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 0.6% for 2005. In 2004, we saw national small business hiring increase by 4.4%.
Gulf Coast Storms and Higher Salaries
While Hurricanes Katrina and Rita seem to have given the small business economy pause,
they've been a boon to small business employees.
Small business salaries in the South jumped to their highest level since November 2004.
We also saw small business salaries increase for the nation.
The SurePayroll Pay Index for the nation jumped 0.16% to 932 in September. It had been at 930 at the end of August.
We've seen small business pay increase in three of the last four months. To put that in perspective, there have only been three up months in the past eighteen months.
Hopefully, this suggests that the threat of prolonged salary deflation is dwindling, but it's probably still too early to tell.
Year to date, small business salaries have dropped 2.1%. That translates to a projected annualized decrease in salaries of 2.8% for 2005.
Independent Contractors
As of the end of September, the SurePayroll Contractor Index stands at 3.29%, exactly
where it stood at the end of August. That means that for every 100 workers engaged by
small business, 3.29 are 1099 independent contractors and 96.71 are W2 employees. Use
of contractors is generally on the rise relative to prior months. 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 is down year-to-date in every region except the Northeast. Small business
size in the Northeast, measured by the number of employees, is up 8.4% year-to-date
and has recorded fourteen straight months of increased hiring. The West appears to be
having a small hiring recovery, having recorded two straight months of increased hiring.
On the salary front, the South and the Midwest remain in positive territory, with year-to-date increases of 1.7% and 1.8% respectively. 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 13 of our 21 benchmark states, up from 11 in the previous month. Year-to-date, firms grew in size in 12 of our 21 benchmark states, up from 11 "up" states at the end of August.
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.
Small Business Scorecards Archive:
