With two months until the November election, it's time to take stock of how small businesses are faring nationwide.
As we do every month, we crunch small business payroll numbers to get a feel for whether small businesses are hiring or firing, whether they are raising or lowering salaries, and whether they are growing more or less reliant on independent contractors.
U.S. small businesses increased their staff levels by 0.42% in August, representing the best one-month increase in hiring so far this year. Year to date, small business hiring is up 2.4% nationwide.
Small business owners have been able to hire new employees because salaries have dropped. In fact, salaries declined by 0.33% in August. The average annualized small business salary for a U.S. employee now stands at $32,182.39. Year to date, salaries have declined 1.3%.
The SurePayroll Hiring Index ended the month at 11,158, a 47-point increase from July. This was the 21st straight month of growth in the national Hiring Index and, on a percentage basis, it was the largest month-over-month increase to date this year, topping strong growth in hiring in July.
In a related survey that we conducted, 17.6% of small business owners said they had hired additional staff in August, up from 13.3% in the prior month. 5.5% indicated they had downsized their staff, down from 8.4% in the prior month. This suggests that small business hiring was generally on the rise in August, which is consistent with what we see in our data.
Business Optimism Rebounds
Small business optimism appears to rebounding as we closer to the November presidential election.
For our August survey, 79.8% of surveyed business owners indicated they are optimistic about the small business economy, up from 63% the prior month and from 62% in June.
Here's a quick sampling of what the optimists are saying:
Clearly, some of the optimism out there is "glass is half full" optimism. In some cases, it's very apparent that small businesses are doing well at the expense of larger business or surviving because things are tight at large businesses and they are sending more business to small companies.
Small Business Salaries Down
The SurePayroll Hiring Index clocked in at in August at 1,047, dropping 4 points.
This means small business salary levels dropped in August by 0.33% on average. Year to date, small business salaries have dropped 1.3%.
There simply isn't enough small business profit these days to afford to pay the salaries that business owners were willing to pay in prior years. Small businesses may be growing, but small business employees are not benefiting from that growth. Owners are also taking less out of their businesses as they deal with many rising costs (e.g. gas, electricity, airfare, raw materials, etc.).
Contractors
Use of contractors was up 1.11% last month. That's the largest one-month increase in small business contractor usage yet this year.
In fact, with the exception of January, we've seen an increase in this important metric every month this year.
The SurePayroll Contractor Index ended August at 3.61%, up from 3.57% in July.
When we say the Contract Index is 3.61%, that means that for every 100 workers engaged by small businesses in August, 3.61 are 1099 independent contractors and 96.39 are W2 employees.
Increased use of contractors usually shows uncertainty about the future of the economy. Hence, it's a bit odd to see optimism rising at the same time as contractor usage rises. It's as if small business owners are saying "I'm starting to feel more optimistic about the economy, but I'm not yet ready to put my money where my mouth is."
Regional and State Performance
On a regional basis, the Midwest, Northeast, South and West experienced hiring growth in August. Monthly hiring gains for these regions were 0.8%, 1.0%, 0.5% and 0.1% respectively. The NorthEast is leading the country in small business growth.
In August, average salaries declined in all regions, except the West. Salary changes for the Midwest, Northeast, South and West were -0.2%, -0.8%, -0.8% and 0.4% respectively.
On a year-to-date basis, hiring changes for the Midwest, Northeast, South and West now stand at 4.8%, 6.1%, 4.9% and -0.1% respectively. The West is the only region where hiring is down year to date.
Year to date salary changes for the Midwest, Northeast, South and West are -1.2%, -4.5%, -6.2% and 4.2% respectively.
As depicted in the graphic below, year-to-date results vary from state to state. The Scorecard comprises data from all fifty states but we pay close attention to states that we have earmarked as "benchmark states": Arizona, California, Colorado, Florida, Illinois, Maryland, Michigan, Minnesota, Nevada, New Jersey, New York, Oregon, Pennsylvania, Texas, Utah, Virginia, and Washington.
Data for our benchmark states are available – just send me an email and let me know if you want the data for your state.
I welcome any and all questions or suggestions regarding our Small Business Scorecard initiative. Feel free to contact me at malter@surepayroll.com or by phone at (847) 676-8420 ext. 7229.
Best regards,
Michael Alter
President
SurePayroll, Inc.
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