Employment and wage growth at small businesses continued to rise steadily through most of last year, but hourly wage growth slowed slightly in December, payroll firm Paychex reported.
Indeed, while wage growth continued to slow throughout 2023, the growth rate in weekly hours worked was the most stable since 2018. A series of rate hikes by the Federal Reserve have helped slow inflation over the past two years.
“Growth has definitely slowed down, but it's still growth,” said Frank Fioril, vice president of risk, compliance and data analytics at Paychex. “We expect wage inflation to also remain moderate and largely decline, reflecting what the Fed is trying to do.”
All 20 major U.S. states report positive job growth by the end of 2023, and eight of them increased their job growth last year.
“We use the word 'resilience,' and small businesses have faced and had to overcome a lot of headwinds over the past year,” Fioril said. “Things are slowing down and slowing down a little bit, but from an overall perspective it's still a pretty good environment.”
The Southern region led job growth among the regions in December and had the highest rate of employment growth in 11 out of 12 months in 2023, while the Western region experienced the slowest rate of employment growth throughout 2023 (1.11 percent). point).
The average pace of employment growth in 2023 remained higher than the pre-pandemic (March 2019 to February 2020) growth rate of 101.10.
Paychex tweaked its methodology in its December report, with numbers above 100 representing growth and numbers below 100 representing contraction, Fiorir explained.
Among the sectors, employment growth slowed the most in December by 2.46 percentage points in leisure and services. The sector started 2023 in first place, but ended the year in sixth place in terms of job growth.
“That was the most volatile, and it came back very strongly during COVID-19,” Fioril said. “Even the wage numbers had double-digit increases for several months. It's really coming out of the boil and slowing down and returning to normal numbers.”
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“A significant number of states and cities have increased their minimum wages, some of them significantly, like California,” Fioril said. “As a result of that, the number will start to increase little by little this year.”
Employment growth is reported monthly by the U.S. Bureau of Labor Statistics.
“It's a little lower than expected, and it's certainly a decrease, but not by a huge amount,” Fiorir said. “It's been down a bit since last month. Wages are starting to fall gradually, and employment is falling as well. The labor market remains tight, but it's certainly slowed down a bit compared to a year ago. is”.
Last month, Paychex