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 Scorecard hiring index ended the month of May at 10,435 nationwide. That's a 5-point decrease from where we were at the end of April, indicating a moderate decline in small business hiring last month.
The downward trend in hiring was confirmed by a SurePayroll survey of small business owners in which 76.8% of respondents indicated that they had not hired new employees in April. To view the complete survey results, click here.
Salaries are trending in the opposite direction. May marked the ninth consecutive month in which small business salaries have increased.
The SurePayroll Pay Index clocked in at 983 at the end of May, up one point from April, or 0.11%. This was only a very slight increase, possibly indicating that the rise in salaries we have seen for so many months may finally be waning.
The average small business salary across the nation now stands at an annualized rate of $30,228.91.
Year to Date Results
For 2006, our year-to-date growth number for small business hiring is -0.3%. That tracks to an annual decrease in small business hiring of just over 0.7% for 2006 if things were to continue at the current pace.
Long story short, small business hiring remains weak. We just are not seeing much growth.
Year to date, small business salaries have increased 3.8%. That translates to a projected annualized increase in salaries of 9.3% for 2006 if the current pace continues.
In the past, we predicted that these larger salaries might have a significant inflationary effect on the economy because business owners must either raise prices or take less profit out of the business. Generally speaking, most business owners prefer to raise prices.
From our daily interactions with small business owners who subscribe to our payroll service, we’ve been hearing anecdotal evidence that they are indeed raising their prices.
Independent Contractors
As of the end of May, the SurePayroll Contractor Index stands at 3.4 percent, slightly up from April. This means that for every 100 workers engaged by small business, 3.4 are 1099 independent contractors and 96.6 are W2 employees. We continue to predict slight increases in contractor use in the near future.
Regional and State Performance
All four regions -- the Midwest, Northeast, South and West – have experienced year-to-date decreases in small business size. The Midwest appears to be struggling the most, with a year-to-date decrease of 1.2% in small business hiring. The West has lost the least amount of ground, and the change in hiring levels there is virtually flat from the beginning of the year.
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 5.9% 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 11 of our 21 benchmark states. 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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