Small businesses started the year hiring and paying their employees more, a survey says.
A Paychex | IHS Markit small business employment index showed both had increases in January, with small business job growth improving 0.18%, ending a string of 10 straight declines.
The small business jobs index stands at 99.88, a 0.18% increase over December. Hourly earnings have grown $0.72 in the past year to $26.38. January's 12-month wage growth rate of 2.81% marks an improvement from 2.78% in December.
Frank Fiorille, vice president of risk management at Paychex, told FierceCEO he saw some seasonality in the figures, but also said tax reform may have played a role.
“You’ll probably see small businesses have more confidence this year now that tax reform is settled,” Fiorille said. “I think they will be more willing to invest and hire that new employee.”
“There are a number of factors that are very much contributing to strong growth in the SMB segment of the economy and leading indicators shape up well for a second-half increase in employment,” said Sam Pillar, CEO of Jobber.
The first is consumer confidence, “which is trending positive over the past year in part a reflection of wages rising to meet the glut of demand for labor,” Pillar said. “More importantly, SMB confidence and optimism in the economy this year is at its highest rate ever, and back to levels not seen in over a decade.”
Pillar said a “huge” number of small businesses plan to increase capital outlays this quarter, which is a very strong leading indicator for employment growth in the back half of the year. Companies buy new equipment when they are confident they're going to grow, then then hire people to run the equipment.
Among companies that plan to grow this year, according to their CEOs:
- JumpStart Games is targeting growth in products and brands and this requires more employees. The company’s planned increase in headcount by 15 employees will represent 30% growth within the U.S., and JumpStart Games is expected to grow to 225 employees globally in 2018, a growth rate of 62%. In addition, JumpStart expects to continue to make sure its facilities can accommodate the anticipated growth. The company recently increased its workspace, moving its corporate headquarters, expanding its space in India and opening a new space in Vancouver.
- XG Sciences, a maker of materials used in aerospace, automotive, energy storage, industrial and consumer markets, announced in January it is investing $15.3 million in capital equipment and infrastructure to open a 64,000-square-foot production facility and create 75 jobs.
- Turner Industries is looking to grow its workforce. The company builds, maintains and services the nation’s heavy industrial sector.
- Sparkhound offers IT staffing and consulting services to small to midsized businesses and is headquartered in Baton Rouge with offices in Houston, Dallas and Birmingham and is currently hiring in all four locations.
"After an extended period of uncertainty, the passing of federal tax reform at the end of last year offered clarity to business owners on the immediate future of U.S. tax policy," said Martin Mucci, Paychex president and CEO, in a statement. "While it's still too early to see the impacts of tax reform on net pay, we'll be keeping a close eye on this in the weeks ahead."