Our Scorecard comprises a set of economic indicators that tracks hiring, salary and other trends in the small business economy. Our analysis is based on aggregated and anonymous payroll data for tens of thousands of U.S. small businesses, coupled with surveys of a smaller subset of those companies.
The summary for August is that hiring is up, while salaries are down.
Year-to-date small business hiring, as measured by changes in the average size of a U.S. small business, is up 1.9 percent.
Small business salaries, on the other hand, have consistently been trending in the opposite direction. Year to date, the average small business salary has dropped 6 percent.
Small Business Optimism Rebounds
With labor costs dropping and business being good enough to add new employees, you might guess that small businesses are feeling pretty good these days.
Apparently, that's the case. For August 2009, we saw a strong rebound in business owner optimism.
If you've been following our Scorecard optimism survey results, you might recall that only 56 percent of responding small business owners indicated that they were optimistic about the small business economy in July. That was a big drop in optimism from June 2009 when 79 percent of respondents indicated they were optimistic about the small business economy.
The good news from August is that the percentage of small business owners who were optimistic shot back to 71 percent.
July pessimism was powered largely by concerns about the costs of health care reform. Many of those concerns seem to have dissipated, now that more facts are on the table and many inaccurate beliefs regarding health care reform have been dispelled.
It also helps that the stock market posted very healthy gains in August, and that a number of other economic indicators suggest that the economy has turned the corner.
In response to a survey we conducted at the end of July, only 56 percent of responding small business owners indicated that they were optimistic about the small business economy.
That represents a big drop in optimism from June 2009 when 79 percent of respondents indicated they were optimistic about the small business economy. In May 2009, 73 percent of respondents were optimistic.
It may seem odd that optimism is dropping at the same time that there are many reports about how the economy appears to have turned the corner toward recovery.
New Jobs
Growing optimism is always good for hiring.
Our SurePayroll Hiring Index rose 21 points to 11,489 in August, up from 11,468 at the end of July. (The Hiring Index tracks the total workforce for a small business, including employees and contractors.)
This represents a 0.2 percent month-over-month increase in hiring.
As of August, the Hiring Index is up 1.9 percent for the year, or an annualized growth rate of 2.9 percent.
Lower Salaries
If you are about to get a job at a small business, expect to make less than you would have if you got the job months ago.
The SurePayroll Pay Index now stands at 967, down 9 points from our July reading of 976. That translates to a 0.9 percent month-over-month drop in average small business salaries.
Year to date, salaries have dropped 6 percent, equivalent to an annualized salary drop of 8.8 percent.
More Independent Contractors
In addition to tracking hiring and salary trends, we track whether companies are becoming more reliant on independent contractors.
The SurePayroll Contractor Index, which tracks this trend, represents the percentage of employed individuals who are working as independent contractors.
As of the end of August 2009, the Contractor Index now stands at 4.2 percent, up from 4.13 percent at the end of July. This means that for every 100 workers engaged by small businesses in August, 4.2 are 1099 independent contractors and 95.8 are W-2 employees.
Rising use of independent contractors is consistent with economic turnaround. There's business to be done, but firms are hesitant to hire full-time workers when part-time contractors might suffice.
Regional and State Performance
Continuing a trend from the prior month, the Midwest, Northeast and South experienced hiring growth in August. Only the West experienced a decline in hiring last month. With respect to salaries, all four regions experienced salary declines in August.
Monthly hiring gains for the Midwest, Northeast, South and West were 0.5 percent, 0.4 percent, 0.3 percent and -0.3 percent, respectively.
Salaries fell across the nation. As mentioned above, average salaries declined in all four regions last month.
In the Midwest, Northeast, South and West, salary changes were -1 percent, -0.9 percent, -0.6 percent and -0.4 percent, respectively.
With respect to year-to-date performance, hiring changes for the Midwest, Northeast, South and West are 3.9 percent, 4.8 percent, 3.2 percent and -1.8 percent, respectively. Year-to-date salary changes are -5.2 percent, -7.5 percent, -5.1 percent and -1.2 percent, respectively.
As depicted in the graphic below, year-to-date results vary by state. The Scorecard comprises data from all 50 states, but we pay close attention to states that we have earmarked as "benchmark states," including California, Texas, Illinois, Minnesota, Colorado, Arizona, Washington, Oregon, Nevada, Pennsylvania, New Jersey and Indiana.
Data for our benchmark states are available — just send me an email requesting the data for your state.
I welcome any questions or suggestions regarding our Small Business Scorecard initiative. You may 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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