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.
Brij Sharma is the Co-founder and a Managing Partner at NTV. Brij has more than 25 years of experience as a successful entrepreneur and investor in the U.S., India, and GCC Region.
Brij founded Tela Sourcing, Inc., an outsourcing company focused on servicing the U.S. healthcare insurance market. Tela served more than 50 health insurance clients and was recognized by Gartner as one of the leading specialized company in healthcare services. Brij successfully sold Tela to TriZetto, Inc., a healthcare technology and solution company controlled by Apax Private Equity.
Most recently, through a joint venture with Davita Inc., Brij founded Express Clinics, a network of owned primary care and population health management centers in India. Davita is a Fortune 500 U.S.-based healthcare company. Ultimately, Brij provided a successful exit to Davita by purchasing their shareholding.
Brij is also the Founder of MDIndia, one of the largest third-party administrators of health insurance services in India. MDIndia manages more than 40 million lives, processes over $1 billion in premiums and provides healthcare access through a contracted national network of more than 4,500 hospitals and healthcare centers.
Brij has an MBA from Yale University and is an engineering graduate of the College of Engineering, Pune, India. Brij is an active investor and has ongoing involvement with ventures in the healthcare technology, outsourcing, and mobile commerce space. Brij has also been an advisor since 2010 to the $50 million Somerset Private Equity Fund, which is focused on healthcare investments in India.
Managing cash flow has become the top priority for financial professionals as their businesses have seen significant drops in cash flow, revenue and profits amid the COVID-19 pandemic, according to a new survey.
“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.”
