Small Business Employment Index Reflects Soft Labor Market: Report
Small businesses created 30,000 new jobs in October, but employees are working fewer hours and making less money. While small business employment grew by 0.14 percent in October, equating to an annual growth rate of 1.7 percent, hours worked and compensation decreased by 0.2 percent and 0.06 percent, respectively. These were among the results of the most recent update of the Intuit Small Business Employment Index, covering the period between Sept. 24 and Oct. 23.
Since the hiring trend began in October 2009, small businesses have created 660,000 new jobs. The index is based on figures from small businesses with fewer than 20 employees that use Intuit Online Payroll. Based on these latest numbers and revised national employment data from the Bureau of Labor Statistics, Intuit revised downward the previously reported growth rate for September to 0.19 percent from 0.3 percent. This equates to 40,000 jobs added in September, down from a previously reported 65,000 jobs.
"While small business employment is up in October, it is not up by much," said Susan Woodward, the economist who worked with Intuit to create the index. "The softness of the small business labor market is not much of a surprise. The breath-holding in Europe over the timing and shape of the Greek bond default was likely weighing on economic decisions at firms of all sizes here, too, and delaying at least some purchase decisions. With the new European deal, there is now hope that this concern will be lifted."
Small business hourly employees worked an average of 106.3 hours in October, making for a 24.5-hour workweek, a 0.2 percent decrease from the revised September figure of 106.6 hours. Average monthly pay for all small business employees declined slightly to $2,622 in October, a 0.06 percent decrease compared with the September revised estimate of $2,623 per month. The equivalent annual wages would be about $31,500 per year, which is part-time work for many small business employees.
"The seasonally adjusted trend in hours worked and compensation has turned down," Woodward said. "This is a further sign of softness in the small business labor market. On the positive side, we do see an increase in the new hire rate and hourly wages for the approximately 65 percent of small business employees who are hourly."
The Small Business Employment Index is based on aggregate and anonymous online employment data from approximately 70,000 small business employers, each with fewer than 20 employees. Intuit reports data for three categories: small business employment, compensation and hours worked. The index data reflects monthly employment activity in small businesses, and is adjusted to account for changes in Intuit's Online Payroll customer base. The percent change is measured monthly using the change in employment for existing Online Payroll customers from one month to the next.