The US small business economy showed better-than-expected growth in May, suggesting that small business owners may have played a pivotal role in helping the country steer clear of recession.
The average small business in the United States increased in size in May by 0.3%, higher than we expected based on last month's 0.1% increase.
The SurePayroll Hiring Index ended the month at 11,035, a 32-point increase from April.
May marked the 18th straight month of growth in the national Hiring Index.
While many small business owners are certainly struggling now, the small business economy has proven to be surprisingly resilient in these difficult times.
If there's a hero in the current economic crisis, it's the entrepreneurs who have refused to surrender and continue to toil diligently to grow their businesses. Without them, we would without a doubt be in a recession right now.
Salaries Dipped in May
Average small business salaries dropped 0.1%, further eroding small business employee purchasing power at a time when gas and food prices are rising.
Given the slowdown in salary declines we witnessed last month, we did not expect such a large decrease in average small business salaries.
The average annualized small business employee salary in the country is now at $32,528.07.
The SurePayroll Pay Index ended the month of May at 1,058, down 2 points from April.
Increased Reliance on Independent Contractors
The SurePayroll Contractor Index ended May at 3.52%, just slightly up from April when the Index stood at 3.50%.
That means that for every 100 workers engaged by small business, 3.52 are 1099 independent contractors and 96.48 are W2 employees.
This is the fourth straight month in which small business reliance on independent contractors has risen.
As we have discussed in the past, this increase indicates that small business owners are not confident about future business levels. As such, they prefer not to add full-time employees (FTEs) to their payrolls.
It may also simply be that there are more contractors to choose from, given that laid off employees often will do independent contracting work while they look for another full-time position. With an increased supply of contractors available to employers, they may decide to give contractors a try, rather than hire a full-time employee.
Regional and State Performance
On a regional basis, the Midwest, Northeast, and South experienced hiring growth in May. However, in the West, the size of the average small business grew smaller in May.
In May, average salaries declined in all four regions, with the largest salary drops occurring in the South.
On a year-to-date basis, every region except for the West remains in positive territory with respect to hiring. Hiring in the West has dropped just slightly year to date.
Salaries, on the other hand, are down in every region except the West year to date. Salaries in the West have risen 2.8% so far this year. However, it appears that higher salary demands in the West may be causing small business owners to downsize.
As depicted in the graphic below, year-to-date results vary from state to state. The Scorecard comprises data from all fifty states but we pay close attention to 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, Oregon, Pennsylvania, Texas, Utah, Virginia, and Washington.
Data for our benchmark states are 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.
Small Business Scorecards Archive:
