Small businesses already showing effects of COVID-19 on hiring
The latest figures on small business employment and wage growth from Paychex show that business is slowing down.
Paychex released its latest figures on small business employment and wage growth, gauged right before many companies began severely curtailing their operations due to COVID-19 – and before Congress gave such businesses lifelines in the latest economic relief package.
Based on data through March 19, the Paychex | IHS Markit Small Business Employment Watch shows a slight decrease in both small business employment and wage growth in March. At 98.21, the jobs index slowed 0.11 percent from February and 0.57 percent year-over-year. Hourly earnings growth dipped to 2.68 percent ($0.72), while weekly earnings growth also decelerated to 3.08 percent.
Related: Retail, grocery hiring heats up as stores rush to meet COVID-19 demand
“While limited at this reading, we’re beginning to see the effects of the COVID-19 crisis impacting hours worked, hiring, and numbers of workers,” says Martin Mucci, Paychex president and CEO. “We’ve been impressed with the speed of the federal government in approving a number of measures to offer relief for small businesses and their employees through the Families First Coronavirus Relief Act, as well as the just-passed Coronavirus Aid, Relief, and Economic Security (CARES) Act.”
The latest federal law allows for the creation of “small business interruption loans” to made by participating banks and guaranteed by the U.S. Small Business Administration. Eligible borrowers – companies, nonprofits with 500 or less employees – can get a loan for up to $10 million to cover payroll support, including paid sick, medical or family leave, and costs related to the continuation of group health care benefits during periods of leave due to COVID-19; employee salaries; mortgage payments; rent (including rent under a lease agreement); utilities; and any other debt obligations that were incurred before the covered period beginning on March 1 and ending on Dec. 31.
The COVID-19 pandemic likely caused most of the slowdown depicted in the March Paychex | IHS Markit report, though there were some bright spots in the country, as of March 19:
- Positive earnings growth momentum toward the end of 2019 has reversed during the first quarter of 2020.
- At 97.45, the West had the steepest employment growth decline, down 0.19 percent from a year earlier. Weekly hours worked growth in the West declined considerably in March as the one-month annualized growth rate fell 2.47 percent. Despite a modest decline in March, the Northeast remains up 0.54 percent from a year ago.
- After a strong finish in 2019, hourly earnings growth in the Northeast slowed again to 2.84 percent. The Midwest reported a modest increase in hourly earnings to 2.40 percent, the only region to improve in March. Earnings growth remains the strongest in the West, though weekly hours worked growth declined considerably in March as the one-month annualized growth rate fell 2.47 percent.
- For the State Jobs Index, Tennessee gained 0.21 percent in March, bringing its index to 100.71 and reinforcing its position as the top-ranked state. Missouri (0.82 percent) and North Carolina (0.80 percent) had notable increases in March. At 97.21, Illinois fell 0.56 percent in March with its index now ranking ahead of only California among states.
- For the State Wage Report, California leads states in hourly earnings growth at 3.42 percent, with Illinois, New York, and Georgia as the only other states above three percent. Ranked last among states for the past five months, Texas dropped further in March to 1.00 percent hourly earnings growth.
- For the Metropolitan Jobs Index, at 100.30, Tampa overtook Philadelphia as the top-ranked metro index with the strongest one-month gain, 0.56 percent. As oil prices fell, the Texas metros of Dallas and Houston both saw index declines of a half-point in March.
- For the Metropolitan Wage Report, Los Angeles leads metros in hourly earnings growth at 3.76 percent, followed closely by San Francisco and Baltimore. One of the few metros to improve in March, Denver moved above three percent hourly earnings growth and is approaching four percent weekly earnings growth as weekly hours worked growth ranks first among metros. Both hourly and weekly earnings growth are now below three percent in the New York metro as weekly hours worked continues to decelerate.
- For the industry Jobs Index, construction and financial activities were the only two industry sectors to improve rates of job growth in March. At 96.39, manufacturing had the biggest decline among metros, 0.36 percent, falling further behind other industry sectors. Down 0.39 percent, small business job growth in Leisure and Hospitality slowed most among industry sectors during the first quarter of 2020.
- For the Industry Wage Report, at 5.25 percent hourly earnings growth in March, leisure and hospitality is more than two percent ahead of the next highest sector (manufacturing: 3.13 percent). Weekly earnings growth remains above four percent in the trade, transportation and utilities sector despite decelerating for the fifth straight month.
- Construction leads sectors in weekly hours worked growth, up 0.86 percent from a year ago and holding steady during the past several months.
- Weekly hours worked growth fell sharply in leisure and hospitality in March, with the one-month annualized growth rate declining 6.58 percent.
- Though year-over-year weekly earnings gains remain strong in the leisure and hospitality sector (4.57 percent), the more recent three-month annualized growth rate is -3.44 percent.
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