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.
The Scorecard hiring index ended the month of June at 10,439 nationwide. That's a 4-point increase from where we were at the end of May, indicating a moderate increase in small business hiring last month.
In addition to the Scorecard’s payroll data analysis showing increased hiring, a SurePayroll survey of small business owners suggested that hires outpaced firers in June. The survey indicated that 16% of respondents had hired new employees in June, whereas only 7% had fewer employees than they had in the prior month. The balance of respondents, 77%, ended June with exactly the same number of small business employees as they had in May.
Salaries continue to trend higher. June marked the tenth consecutive month in which small business salaries have increased.
The SurePayroll Pay Index clocked in at 987 at the end of June, up four points from May, or 0.33%. While increasing salaries suggest inflation, we view the June increase as relatively modest.
The average small business salary across the nation now stands at an annualized rate of $30,328.
Year to Date Results
For 2006, our year-to-date growth number for small business hiring is -0.26%. That tracks to an annual decrease in small business hiring of just over 0.5% for 2006 if things were to continue at the current pace.
While small business hiring has been weak throughout the year, it’s a positive sign that hiring increased in June, suggesting that the downturn that many have predicted for the second half of 2006 may not be as dire as was initially predicted. Certainly, the Fed’s latest indications that interest rate increases may soon stop will likely have a positive effect on small business hiring.
Year to date, small business salaries have increased 4.13%. That translates to a projected annualized increase in salaries of 8.43% for 2006 if the current pace continues.
That means small business salaries have now returned to levels we have not seen since June 2004. While increasing salaries can create inflationary pressures, one can argue that recent salary inflation is in large part making up for the significant salary deflation we saw in 2004 and much of 2005.
Independent Contractors
As of the end of June, the SurePayroll Contractor Index stands at 3.38 percent, slightly up from May. This means that for every 100 workers engaged by small business, 3.38 are 1099 independent contractors and 96.62 are W2 employees. We continue to predict slight increases in contractor use in the near future, but we have been predicting that for some time and the level of contractor usage has remained quite stable. (In our recent survey of small business owners, we found that 56% of respondents indicated that they do not use independent contractors.)
Regional and State Performance
Three regions – the Midwest, Northeast, South – have experienced year-to-date decreases in small business size. Only the West shows increased hiring, with a 0.3% year-to-date increase. Still, June’s increases in the West were crucial in bringing the national hiring average into positive territory.
The Midwest appears to be struggling the most, with a year-to-date decrease of 1.5% in small business hiring.
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 6.3% year to date.
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 10 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.
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