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 16,000 small business customers.
It's August 2006. How's the economy doing?
On the bright side...
Exports are growing. Household incomes are rising. Unemployment is low. Mortage rates are running just over 6.5% for a 30-year fixed rate loan. Crude-oil futures fell below $70 a barrel for the first time since April. Consumer spending and business outlays are on the rise.
On the grim side...
A downturn in property values appears to be gaining steam. Consumer prices have been rising. Geopolitical tensions are a constant backdrop, with the ongoing war in Iraq, the Israeli-Hezbollah conflict and recent activity by would-be terrorists in Britain.
Our insider’s view of the health of the national economy is constrained to what’s happening in the small business economy. Mind you, that’s a big chunk of the economy. Over 99% of America’s businesses are small businesses. Pick a random person on the street and there’s a greater than 50 percent chance that they work at a small business.
Based on our payroll data for our over 17,000 small business customers, here's what's happened in the small business economy this past month.
Small business hiring decreased once again in August.
This is a trend we’ve been seeing for a quite a while. Hiring has been down in six of the last seven months.
The Scorecard hiring index ended the month of August at 10,431 nationwide. That's a 5-point drop from where we were at the end of July.
In addition to the Scorecard’s payroll data analysis showing decreased hiring, a SurePayroll survey of 476 small business owners confirm that hiring is flat in the small business economy. 81.5% of respondents ended August with exactly the same number of small business employees as they had in July. Only 12% of respondents indicated that they had hired new employees in August, while 6.5% indicated that they had downsized their staff in August.
Salaries continue to trend higher. August marked the twelfth consecutive month in which small business salaries have increased. Great news for the employees. Not so great news for small business owners.
The SurePayroll Pay Index clocked in at 1001 at the end of August, up eleven points from July, or 1.07%. The average small business salary across the nation now stands at an annualized rate of $30,114.
In our survey of small business owners, we discovered that 35% of small business owners say that they now have to pay more for a given employee than they had to pay one year ago. Only 1% are able to pay the employee less money this year than they had to pay one year ago for an equivalent employee. The remaining respondents, 64%, are able to hire new employees while paying the same amounts they paid one year ago.
Year to Date Results
For 2006, our year-to-date growth number for small business hiring is -0.3%. If this pace continues, the average small business in the United States will have shrunk by approximately 0.50% at the end of the year. It’s a decline — but it’s a fairly modest decline.
Year to date, small business salaries have increased 5.6%. That translates to a projected annualized increase in salaries of 8.54% for 2006 if the current pace continues.
Small business salaries are now at the highest levels we have seen since July 2004.
Independent Contractors
As of the end of August, the SurePayroll Contractor Index stands at 3.40 percent, slightly down from July. This means that for every 100 workers engaged by small business, 3.40 are 1099 independent contractors and 96.60 are W2 employees.
In our August survey of small business owners, we found that 60% of respondents indicated that they do not use independent contractors.
Optimism Increase
Despite the slowness in the economy and higher salaries to pay, most small business owners remain optimistic. 78% of our survey respondents said they are optimistic about the small business economy. In July, 81% of survey respondents were optimistic.
Regional and State Performance
Three regions — the Midwest, Northeast, and South — have experienced year-to-date decreases in small business size. Only the West shows increased hiring, with a 0.8% year-to-date increase. The Northeast has experienced the biggest drop in small business hiring, with a 3.0% year-to-date decrease.
Salaries are up year to date in all four regions: the Midwest, Northeast, South and West. Salary gains are highest in the West, where the average small business salary has risen 8.2% year to date. The Northeast is a close second, with a 7.6% year-to-date increase.
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 20 of our 21 benchmark states. Florida remains the only state where salaries have shrunk since December 2005. Firms have increased in size in 9 of our 21 benchmark states. Data for our benchmark states is available — just send me an e-mail 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:
Scorecard |
2008 |
2007 |
2006 |
2005 |
2004
