The SurePayroll Small Business Scorecard tracks hiring, salary and other trends based on aggregated and anonymous payroll data for tens of thousands of U.S. small businesses.
Year-to-date small business hiring, as measured by changes in the average size of a U.S. small business, is up 1.7 percent.
Salaries, on the other hand, have consistently been trending in the opposite direction. Year to date, the average small business salary has dropped 5.1 percent.
No End In Sight for Declining Salaries
We track small business salaries with our SurePayroll Pay Index, which is an economic index of the average salary paid by a U.S. small business.
The Index now stands at 976, down 8 points from our June reading of 984. That's a one-month drop of 0.8 percent, exactly the same decline we saw in our June Small Business Scorecard.
Lower salaries make it easier for business owners to hire new employees. Unfortunately, that benefit comes at a price to workers who are entering the workforce or returning to the workforce as they must accept lower paychecks than they would have received in prior years.
Year to date, salaries have dropped 5.1 percent. The average small business annual paycheck in the United States now is $29,995. One year ago, in July 2008, it was $32,290. The last time the average small business paycheck dipped under $30,000 was March 2006. Since we began the Small Business Scorecard in January 2004, the lowest average small business paycheck was $28,589 in August 2005.
Small Business Optimism Plummets
For July 2009, we saw a substantial decrease in business owner optimism levels.
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.
However, many respondents indicated that their pessimism is powered primarily by increased government spending and concerns about the costs of health care reform.
It seems that many small businesses want the cure but they don't like the medicine that has been prescribed.
The SurePayroll Hiring Index
Our SurePayroll Hiring Index rose 21 points to 11,468 in July, up from 11,447 at the end of June.
This represents a 0.2 percent month-over-month increase in hiring. Compared to earlier in the year, growth in hiring has slowed, but new jobs are emerging.
As of July, the Hiring Index is up 1.7 percent for the year. Even in this economic downturn, small businesses are still adding new workers. In fact, small business hiring is currently on pace to grow by 3 percent this year.
The SurePayroll Hiring Index is calculated from the actual payroll payments made by tens of thousands of small businesses that rely on our payroll service. The Hiring Index tracks the total workforce for a small business, including employees and contractors.
Boom Time For Independent Contractors
Based on the July SurePayroll Small Business Scorecard results, we continue to see small business owners relying on independent contractors.
The economic index we generate to track this trend — the SurePayroll Contractor Index — represents the percentage of employed individuals who are working as independent contractors.
As of the end of July 2009, the Contractor Index now stands at 4.13 percent, up from 4.06 percent at the end of June. This means that for every 100 workers engaged by small businesses in July, 4.13 are 1099 independent contractors and 95.87 are W-2 employees.
This month's level for the index, 4.13 percent, is the high point for the Contractor Index since we started publishing the Small Business Scorecard in January 2004, and it's the 18th straight month in which the Contractor Index has increased.
Hiring an independent contractor is an attractive option for a small business owner because there is no need to offer contractors benefits or to file and pay payroll taxes for contractors.
Regional and State Performance
Three regions – the Midwest, Northeast, and South – experienced hiring growth in July. Hiring was down only in the West, the only region in the U.S. where hiring has steadily declined since August 2008. On the compensation front, all four regions experienced salary declines in July.
Monthly hiring gains for the Midwest, Northeast, South and West were 0.4 percent, 0.4 percent, 0.3 percent and -0.3 percent, respectively.
As mentioned above, average salaries declined in all four regions last month.
In the Midwest, Northeast, South and West, salary changes were -0.9 percent, -1.0 percent, -0.6 percent and -0.2 percent, respectively.
With respect to year-to-date performance, hiring changes for the Midwest, Northeast, South and West are 3.4 percent, 4.4 percent, 2.9 percent and -1.5 percent, respectively. Year-to-date salary changes are -4.2 percent, -6.6 percent, -4.6 percent and -0.9 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.
Questions regarding the SurePayroll Small Business Scorecard can be directed to Marissa Hermo. Marissa can be reached at mhermo@kruppnyc.com or by phone at 212.886.6711.
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