According to the latest Paychex | IHS Market Small Business Employment Watch report, small business job gains in July were moderate. However, some regions of the country were doing much better than others. This is always the case, but this time around the driver is the number of positive COVID-19 cases.
The President and CEO of Paychex, Martin Mucci, explains the impact of the pandemic in the release for the report. Mucci says, “The rebound in small business job growth has slowed mostly in regions where there has been a recent surge in cases.”
James Diffley, chief regional economist at IHS Markit, also sites indicators driven by the pandemic. Diffley says, “The jobs index fell slightly in July as a number of states were forced to backtrack on early reopenings.”
Until there is a uniform opening of all businesses across the country, the regional fluctuations will be much higher than normal.
Paychex IHS Market Small Business Employment Watch for July 2020
The Paychex | IHS Markit Small Business Employment Watch report focuses exclusively on small businesses. It explores regional, state, metro, and industry sector activity with a monthly analysis of national employment and wage trends.
The numbers for the Small Business Job Index come from aggregated data from businesses with less than 50 employees.
For the month of July, the index was 94.59, and to date, the national index has slowed down 3.65% since last year. This ends a 3-month downward national trend starting in May. The good news is since falling 3.65% in April, the decline has been less dramatic; only 0.24% in July.
In terms of decline around the country, the surging COVID-19 cases in the South and West are responsible for the largest decline in employment growth. It was down -0.31% in the South and -0.33% in the West.
In the Northeast, the employment growth is at historic lows for the past two months. It was down 0.24% in June and another 0.22% in July. This leaves the Midwest, which is responsible for delivering the greatest stability in July, managing a loss of only -0.04%.
When it comes to states, Florida leads the way for small business employment growth slowing down just 0.44% in July. In contrast, the index for Washington fell 1.84%, hitting a record low of 91.79 in the index for the month.
The metro locations in these states were led by Denver which became the top city for small business employment growth. Conversely, Seattle was last slowing down 1.89%, and falling to 91.05% in the index for the month.
As to the industries generating more jobs for small businesses, construction, financial activities and education and health services take the top three spots. The monthly change for July was -0.25%, -0.13%, and -0.11% respectively.
In addition to the jobs, the report also looks at the wages of small businesses. It analyzes the hourly and weekly earnings of workers in the U.S. along with how many hours they work.
Nationally the hourly earnings slowed 3.29% or 89 cents to $28.08. This the report says is the first decline since the start of the pandemic. Regionally, the Northeast leads hourly earnings growth at 4.38%, but the South trails all regions with 2.51% hourly earnings growth. The report says the South trails in both hourly earnings and hours worked growth compared to all regions.
The leading state when it comes to hourly earnings is New Jersey with 5.60% at $28.90. Pennsylvania and Massachusetts follow with a growth of 4.95% and 4.29% respectively for each state. For the metro locations Riverside, CA, Baltimore, and Philadelphia are the top three with growths of 5.84%, 5.34%, and 5.11% respectively for these cities.
Beyond the Pandemic
As each region in the U.S. as well other countries deal with regional outbreaks they will have different economic realities. And for some industries, this will continue long after a vaccine is found.
The key, as some small businesses have shown, is to continue to adapt and serve customers with digital technology, curbside pickup, delivery and new innovative ways.
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