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.
The small business economy continues to chug along, adding new jobs to the overall economy.
The SurePayroll Hiring Index ended the month at 10,676, a 42-point increase (0.39%) from May.
June marks the seventh straight month of hiring growth.
Year to date, small business hiring has increased 2.2%. On an annualized basis, that puts small business hiring on track to grow 4.5% this year. (In 2006, small business hiring declined by 0.2%.)
The small business economy is growing in spite of a number of negative economic factors: rising gasoline prices, higher interest rates, declining house prices and the subprime mortgage debacle.
We've commented before about the tenacious nature of the small business economy. Small business owners are not deterred by negative macroeconomic events. With an eye towards growing their own businesses, small business owners find ways to persevere.
Salaries Still Rising
On the salary front, salaries continue to rise.
The SurePayroll Pay Index was 1,048 at the end of June, up two points from May, or 0.23%.
The average small business salary for the United States now stands at an annualized rate of $32,215. Year to date, salaries are up 2.9%.
Simply put, it's getting tougher to find good people. There is a labor shortage in play that is driving up the costs for labor.
Since increasing labor costs result in inflationary pressures on the economy, our recommendation to legislators is to focus on reducing the threat of scarce labor. For example, increase the number of visas available to immigrant workers and you will slow the upward trend in salaries. You won't be taking away jobs from U.S. citizens. Rather, you will be enabling the economy to grow in a healthy fashion.
Alternatively, give retiring baby boomers some incentive to rejoin the workforce. Perhaps small business owners should receive a credit of some kind for hiring older workers.
Independent Contractors
The SurePayroll Contractor Index stands at 3.38% as of the end of June 2007. That means that for every 100 workers engaged by small business, 3.38 are 1099 independent contractors and 96.62 are W2 employees.
In other words, 3.4% of the small business economy is powered by independent contractors. Contractors are an attractive option for small business owners because there are no employer payroll taxes and no benefits need to be offered to 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 also up year to date in all four regions.
The West continues to lead the country in year-to-date 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 June. Only three states — Indiana, 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, Maryland and Michigan. Salaries have fallen most sharply in New York. In contrast, Nevada boasts the year-to-date highest salary growth levels.
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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