Small business job growth and hourly earnings declined slightly in November, according to payroll giant Paychex, amid signs of a slowdown in the economy as businesses continue to struggle with rising COVID-19 infections across the country.
Small business hiring fell 0.03 percent, while hourly earnings growth slowed for the fifth month in a row, from a peak of 3.29 percent in June to 2.76 percent in November, according to the Paychex | IHS Markit Small Business Employment Watch. The number of weekly hours worked also showed a decrease of 0.04 percent year over year.
Jason Pett, PwC's US Internal Audit, Compliance & Risk Management Solutions Leader, Financial Services Risk Assurance leader and part of the Global Internal Audit leadership team, has over 20 years of experience delivering internal audit, external audit and risk management services. He has led full outsource, large co-source and strategic sourcing engagements for many prominent companies, including leading internal audit functions for globally diversified Fortune 500 companies. Jason's extensive experience also includes implementing enterprise wide risk and compliance programs for organizations in a variety of industries and building integrated and synergistic risk, compliance and internal audit programs to optimize alignment and efficiency of delivery. He has assisted organizations in the design of start-up internal audit, risk management and compliance functions as well as working with companies to transform existing internal audit, compliance and risk management functions into value added, risk based and strategically aligned functions.
Bryan Yurcan is a senior writer with American Banker, with a focus on financial technology. Prior to American Banker, Bryan served as an editor with Bank Systems & Technology for nearly four years, as well as holding various other editorial roles for B2B tech and business publications. Bryan has been a guest speaker at bank technology industry conferences and has been quoted on the subject in numerous publications, including the Providence Business Journal and Columbus Dispatch.
Nicole Gelinas, a Chartered Financial Analyst, is a senior fellow at the Manhattan Institute and a contributing editor to the City Journal. She is the author of the book After the Fall: Saving Capitalism from Wall Street-and Washington.
“Nothing has been moving for a few months in all the key employment indicators we look at and watch,” said Frank Fiorille, vice president of risk management, compliance and data analytics at Paychex. “They really have stabilized. I actually thought the index was going to be a lot lower given the COVID spikes, so I was pleasantly surprised to see it just moderately declined by 0.03 percent from October, which is relatively flat.”
Paychex competitor ADP also reported a slowing in small business job growth on the ADP National Employment Report, with small businesses adding 110,000 jobs in November, compared to 146,000 in October. Overall, the private sector added 307,000 jobs across businesses of all sizes, according to ADP, but that was down from 404,000 in October.
“While November saw employment gains, the pace continues to slow,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute, in a statement Wednesday. “Job growth remained positive across all industries and sizes.”
According to Paychex, the South remained the top-ranked region of the U.S. for employment growth, a full one point above the next highest region. The Northeast was the only region with weekly earnings growth above 3 percent. Texas has climbed one spot in the state rankings for each month for the past quarter, now ranking first among states in job growth.
Construction led the way among industries in terms of job growth for the seventh consecutive month. However, the leisure and hospitality industry lagged far behind with the weakest number on Paychex’s index for the past eight months. While leisure and hospitality ranked in first place among the sectors in terms of hourly earnings growth (increasing 4.15 percent), it was last in terms of weekly hours worked growth (declining 2.44 percent). Unlike other sectors, the financial activities sector didn’t experience a significant disruption in weekly hours worked as growth has been steadily positive and consistent during 2020.
With Congress again talking about passing a stimulus package before the end of the year and President-elect Joe Biden set to take office in January, he advises accountants to keep a close watch on the changes coming out of Washington.
“I guess the message would be that it’s not a time to take your eye off the ball,” said Fiorille. “Watch the stuff and be educated, because given COVID, given a new administration, new people coming into Congress, new leadership, there’s probably going to be more change with that.”
He is also seeing changes happening at the state level. “There’s a lot going on within state governments, whether it’s on the employment law front or minimum wage, or paid sick leave or unique taxes,” said Fiorille. “It seems like a lot of states are doing their own stuff. Be aware and be mindful of that.”
Earlier this week, the Government Accountability Office issued a reporton the federal response to COVID-19, including the challenges faced by the Internal Revenue Service and the Treasury Department in processing of employer tax credits, distributing Economic Impact Payments and in reaching individuals who may be eligible, but have not yet received an EIP, as well as the IRS’s implementation of the Presidential Memorandum on employee payroll tax deferral, and the IRS processing of amended individual and corporate income tax returns. The GAO recommended that the Treasury, in coordination with the IRS, should begin tracking and publicly reporting the number of individuals who were mailed an EIP notification letter and filed for and received an EIP, and use that information to inform ongoing outreach and communications efforts.
The report also found problems with the way the Department of Labor has been tracking unemployment statistics, in part due to delays in reporting by states that have been overwhelmed by unemployment claims. The GAO recommended that the Labor Department revise its weekly news releases to clarify that in the current unemployment environment, the numbers it reports for weeks of unemployment claimed don’t accurately estimate the number of unique individuals claiming benefits. The report also suggested the Labor Department should pursue options to report the actual number of distinct individuals claiming benefits, such as by collecting the data that’s already available from states.
“Clearly states are in various stages of how quickly they can get to them,” said Fiorille. “We kind of kid around that we’ve seen some job postings for COBOL programmers because some of these systems were designed in COBOL, so they’re not state of the art, to say the least. Depending on the state, you’ve seen delays and issues in the whole control function of that. Clearly you also have some fraud involved. You’re seeing more and more on that. Whenever you have this kind of chaos, like you’re reading about with the PPP program because they needed to get the money out quickly, they didn’t really have time to set up the walls and guardrails. It sounds like some of the numbers were overstated, which in some sense would be good that not as many people are on unemployment. In fact, the numbers that came out today were positive. The new UI numbers and the continuing claims were both down, but there’s still a lot of people hurting. It’s still not a good picture.”
