Here's what's happened in the small business economy this past month, based on payroll data for our over 18,000 small business customers.
Small businesses are alive and well in our country, according to our SurePayroll economic indices.
Every month, we crunch the numbers on the payroll data that flows through our payroll outsourcing company to many of America's small business employees and contractors.
Annually, that's over $3.5 billion dollars worth of data that tells a story about the American small business economy.
That economy is hugely important. It represents over 25 million small firms in the country employing approximately 50 percent of the nonpublic workers and generating half of the private, non-farm gross domestic product.
With four months of 2007 now behind us, it appears indisputable that 2007 is going to be a strong year for the small business economy.
The SurePayroll Hiring Index ended the month at 10,600, a 42-point increase (0.39%) from March.
That's the fifth straight month of hiring growth.
Year to date, small business hiring has increased 1.5%. On an annualized basis, that puts small business hiring on track to grow 4.6% this year. (In 2006, small business hiring declined by 0.2%.)
Despite all the economic doomsayers out there, the small business economy continues to chug along. It is an awesome thing to behold and a strong reminder that entrepreneurs and small businesses remain the heart of the American spirit — and a powerful driver of the American economy.
Salaries Still Rising
The SurePayroll Pay Index was 1,038 at the end of April, up four points from March, or 0.3%.
The average small business salary for the United States now stands at an annualized rate of $31,892. We have not seen salaries this high since we started tracking the small business economy.
Talk about being on an economic roll! April's increase in salaries marked the twentieth consecutive month of continued salary growth in the small business economy.
That's great news for the overall economy.
Of course, small business owners don't like to see employee salaries rising, but evidently it's not hurting them too much. They are still hiring, after all.
But the biggest impact of higher pay is on the consumption side of the coin.
Rising salaries are a booster shot to consumer spending.
Although consumer spending recently has dropped slightly, few would dispute that consumer spending has been carrying the economy for quite a while. The big question is: should one be bullish or bearish on consumer spending in the months to come?
We disagree with those who predict that gasoline prices and a sagging housing market will limit consumer spending in the months to come. Based on the salary increases we saw in April and the increased number of jobs, we predict consumer spending will show monthly gains over the next few months.
Independent Contractors
The SurePayroll Contractor Index stands at 3.39% as of the end of April 2007. That means that for every 100 workers engaged by small business, 3.39 are 1099 independent contractors and 96.61 are W2 employees.
In other words, 3.4% of the small business economy is powered by independent contractors.
Regional and State Performance
Small business hiring is up year to date in the Midwest, West, Northeast and South.
On the salary front, salaries are up year to date in the Midwest, South and West. The Northeast is the only region in which average small business salaries have dropped.
The West continues to lead the country in hiring growth and salary growth.
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, firms have increased in size in 18 of our 21 benchmark states in April. Only three states — Florida, Virginia and Michigan — have experienced decreasing hiring year to date.
Year to date, salaries are up in 17 of our 21 benchmark states. Salaries have decreased year to date in New York, Indiana, Michigan and North Carolina.
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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