U.S. Small Business Job Growth Continues as Wage Inflation Moderates to Close 2023

U.S. small businesses experienced job growth for all of 2023 and extended a cycle of consistent job growth for 33-straight months, according to December data from the Paychex Small Business Employment Watch. The Small Business Jobs Index closed the year at 101.21 (1.2% growth), while hourly earnings growth for U.S. workers in December (3.48%) was down from 4.93% in December of 2022.

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U.S. small businesses experienced job growth for all of 2023, according to December data from the Paychex Small Business Employment Watch. (Graphic: Business Wire)

“As the Paychex Small Business Employment Watch has consistently shown all year, the resiliency of the small business community has allowed them to meet the many challenges of 2023 and continue to grow,” said John Gibson, Paychex president and CEO. “Wage inflation also continues to slow indicating that the actions taken by the Fed are having their desired effect on inflation.”

“With a prolonged tight labor market challenging employers to find and retain qualified workers, policymakers should focus their efforts on increasing the participation rate and quality of the U.S. workforce. The Fed’s actions appear to be driving a soft landing as we’ve seen wage inflation normalize without negative impacts on job growth across the U.S. As we look ahead to 2024, small businesses will need to continue to show their resilience as they face many of the same challenges of 2023, such as retaining and attracting quality employees, accessing affordable growth capital, and navigating even more government regulations,” Gibson added.

2023 Year in Review

• Nationally, small businesses have experienced job growth for all of 2023, extending a streak of consistent job growth to 33-straight months.
• In 2023, wage growth continued to slow through the year, decreasing about one and a half percent from 4.93% in December 2022 to 3.48% in December 2023. In addition, weekly hours worked growth in 2023 was the most stable it has been since 2018.
• All 20 of the largest U.S. states reported positive job growth to end 2023 and eight of those increased their rate of job growth during 2023.
• At 101.75, the South led regions in December and had the strongest rate of job growth for 11 of 12 months in 2023, while the West region slowed the most during 2023 (1.11 percentage points).

December 2023 Highlights

• In December, small business job growth increased by 1.21%, standing at 101.21.
• Hourly earnings growth for U.S. workers in December (3.48%) was relatively unchanged since November (3.47%).
• The average pace of job growth in 2023 remained above the growth rate leading up to the pandemic (March 2019 – February 2020) when it was 101.10.
• At 100.66 in December, Leisure and Hospitality slowed its pace of job growth the most among sectors (2.46 percentage points) and, while the sector started 2023 first, it ended ranked sixth in job growth.

The complete Small Business Employment Watch results for December 2023, including interactive charts detailing the data at a national, regional, state, metro, and industry sector level are available at www.paychex.com/watch. Learn more and sign up to receive monthly Employment Watch alerts.

About the Paychex Small Business Employment Watch*

The Paychex Small Business Employment Watch is released each month by Paychex, Inc. Focused exclusively on businesses with less than 50 workers, the monthly report offers analysis of national employment and wage trends, as well as examines regional, state, metro, and industry sector activity. Drawing from the payroll data of approximately 350,000 Paychex clients, this powerful industry benchmark delivers real-time insights into the small business trends driving the U.S. economy.

* Editor’s Note: For detail on the new methodology of the Small Business Jobs Index, refer to “Understanding the Index” on the Paychex Small Business Employment Watch site. Wage data is unchanged by the update.

About Paychex

Paychex, Inc. (Nasdaq: PAYX) is an industry-leading HCM company delivering a full suite of technology and advisory services in human resources, employee benefit solutions, insurance, and payroll. The company serves approximately 740,000 customers in the U.S. and Europe and pays one out of every 12 American private sector employees. The more than 16,000 people at Paychex are committed to helping businesses succeed and building thriving communities where they work and live. Visit paychex.com to learn more.

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