The Good News on Small-Business Hiring Trends

Overall private sector hiring may have slowed down according to Wednesday’s ADP report, but the outlook is brighter on Main St., according to some other fresh data.

Data released this week by both Intuit and Paychex/IHS show a strong hiring trend for small businesses. According to Intuit, small businesses with fewer than 20 employees added 35,000 jobs in May – the largest monthly increase in more than a year. Intuit also noted that May’s increase is significantly greater than the post-recession average of 12,000 new jobs added per month since April 2010.

“In addition to the impressive increase of jobs this month, the hiring rate is also at the highest level we’ve seen since early 2009,” said Susan Woodward, the economist who helps create Intuit’s employment index. Woodward attributed the job growth to the uptick in homebuilding, as housing starts increased from 947,000 units in March to 1,072,000 units in April.

The Paychex/IHS Small Business Jobs Index, which looks at a slightly larger group, analyzing small businesses with up to 50 employees, also showed signs of strength. The index grew 0.05% in the 12-month period up to May, leading to a slight dip from April’s peak level.

“I would caution people against jumping to conclusions based on one month of data and [encourage them to] see what the trend looks like,” said Jim Diffley, IHS’ chief regional economist.

On this note, Diffley said the trend over the last three months has been very encouraging. “We see a very positive high level [of hiring] relative to historic terms. In March, it was high, then there was an all-time high in April, and then May came down to the levels seen in March. It makes this quarter the highest quarter since the recession,” said Diffley.

Like Woodward, Diffley and Martin Mucci, the president and CEO of Paychex, point to the housing sector as the engine behind the recovery on Main St.

“With real estate markets rebounding in the Southwest and increases in tech jobs in the Pacific Northwest, we’re hopeful that the slow, steady growth we’ve been seeing will continue to advance,” said Mucci.

In the Mountain region, where small businesses grew the most in May, housing has been coming back strong. Regions showing slightly softer growth, such as the South Atlantic and East South Central regions, are those where Diffley and Mucci say foreclosures are still outweighing the gains.

“Florida is starting to pick up again as well. It’s hard to generalize … but we see some trends emerging, and [these regions] will pick back up,” said Mucci.

The Intuit Small Business Employment Index is based on anonymous data from roughly 230,000 small business employers within Intuit and Quickbooks’ customer base. The Paychex/IHS Index analyzes data from 350,000 small businesses using Paychex’s payroll services.