According to the Census Bureau, small businesses employ more than half of all workers in the United States. which is why small business hiring is watched closely by economists as a bellwether of the overall economy. So is small business hiring strengthening, or weakening? Well, that depends on who you ask.
ADP, a firm that provides payroll services for companies employing more than 650,000, says that small businesses hiring was “a little stronger” this past month. According to an Associated Press report this week, ADP said companies with less than 49 employees added 68,000 jobs in February, an improvement from 63,000 in January. All companies in ADP’s monthly study showed a “healthy gain” of 235,000 jobs with “significant increases in construction, hotels and restaurants, and education and health care.”
However, ADP’s biggest competitor Paychex wasn’t as bullish. Paychex — which processes payroll for about 605,000 employees at their clients — reported small declines in jobs and wage growth in February. Its monthly Small Business Jobs Index is actually down one percent from a year ago. More concerning, weekly earnings growth is also slipping.
The good news is that both companies are reporting a growth in hiring, not declines. But why the difference in the rate of growth? No one really knows. It could be slight variances between the two companies’ data sets, but given the amount of data analyzed and the strict methodologies used over many years producing these reports I don’t give much weight to that idea.
Paychex’s Chief Executive Martin Mucci has a reason: He attributes the slowdown in hiring growth to a simple decline in the inventory of people available.
“The results of the Small Business Jobs Index over the past year are evidence of the tightening labor market,” he said in a statement. “As the growth in jobs stabilizes because of challenges in finding qualified employees, we expect to see business owners making positive changes to wages and benefits to recruit and retain top quality talent.”
In other words, small businesses better step up their game if they want to find people in an ever-decreasing pool.
ADP’s small business employment numbers may soon start to align more with Paychex’s if this doesn’t happen. Ahu Yildirmaz, who is the co-head of the ADP Research Institute, seems to agree with Mucci about available people: “At this pace of job growth, employers will soon become hard-pressed to find qualified workers.”
Author’s note: Paychex is a client of my company, The Marks Group PC. I have not been compensated for this article.