MTS Insights

Paychex Small Business Employment Watch

Data Employment

Source: Paychex
Source Link: https://www.paychex.com/
Frequency: Monthly
Next Release(s): February 3rd, 2026 8:30 AM

Latest Updates

The Paychex Small Business Jobs Index ended December at 99.26 (2025 avg: 99.67 vs 100.22 in 2024), underscoring a continued multi-year slowdown in small business hiring.
- The jobs index has decelerated steadily over the past four years, averaging 104.50 in 2021, 103.80 in 2022, 101.44 in 2023, 100.22 in 2024, and 99.67 in 2025, indicating a persistent cooling in small business employment growth.
- The Midwest averaged 99.65 in 2025 and tied with the Northeast at 99.65 in December, making it the strongest region for small business employment growth over the year.
- The West averaged 98.72 in 2025 and has remained below the 100 baseline for 21 consecutive months, ranking last among regions every month since February 2025.
- Indiana averaged 101.50 during 2025 and ranked first among states at both the start and end of the year, standing out as one of the few states with consistent above-baseline growth.
- California and Washington both averaged below 99 in 2025, while Maryland was the only other state to remain below 99 for the full year, highlighting regional weakness concentrated on the coasts.
- Texas averaged 100.44 in 2025 but fell to 98.56 in December, its lowest reading since March 2021 and nearly three points below its level at the end of last year.
- Education and Health Services led all sectors with a 2025 average of 100.49 and has posted positive growth for nearly five consecutive years, while Financial Activities slipped below 100 in December and Leisure and Hospitality ended 2025 as the weakest sector by both one- and three-month changes.
Hourly earnings growth rose to 2.71% YoY in December (vs 2.74% 2025 avg), as the short-term 1-month rate annualized accelerated to 3.43%, the highest of 2025.
- Hourly earnings growth has remained below 3% since August 2024, marking 17 consecutive months of subdued annual wage growth despite recent incremental improvement.
- One-month annualized hourly earnings growth accelerated to 3.43% in December, the highest level of 2025 and the strongest reading since January 2024, pointing to firmer short-term momentum.
- Weekly earnings growth increased to 2.72% YoY in December, ending the year above its 2025 average of 2.58%, suggesting broader gains when accounting for hours worked.
- Weekly hours worked growth rose to +0.25% YoY, the highest level since May 2021, highlighting an improvement in labor utilization late in the year.
- The Midwest led all regions in December and for full-year 2025, with hourly earnings growth at 2.95%, weekly earnings growth at 3.30%, and weekly hours worked growth at 0.42%.
- The South posted the weakest hourly earnings growth at 2.47% for a seventh straight month, though weekly hours worked growth has remained positive for six consecutive months.
- Indiana ranked first among states in December with hourly earnings growth of 4.21% and weekly earnings growth of 4.82%, followed by Illinois (3.51%) and Michigan (3.25%), reinforcing Midwest outperformance.
- Manufacturing remained among the top three sectors for hourly earnings, weekly earnings, and weekly hours worked growth throughout 2025, while Education and Health Services ranked last for hourly earnings growth (2.40%) in Q4 and weekly earnings growth (2.23%) for the full year.
The Paychex Small Business Jobs Index rose to 99.38 in November (+0.11 pts MoM), marking a modest improvement but keeping the national index below the 100 baseline for year-over-year growth.
- The national index has averaged 99.71 so far in 2025, running about -0.5 pts below the 2024 average and indicating slightly softer small business job growth this year.
- The Midwest led regions for the 18th straight month at 99.79, while the Northeast climbed +0.44 pts to 99.75, returning to its level from a year earlier.
- Five of 20 states posted readings above 100, with Indiana topping the list at 101.22 after gaining +1.54 pts over the past quarter.
- Maryland was the weakest state at 97.45, down -2.18 pts over the quarter, while Tennessee (98.89) and Massachusetts (99.69) remained below 100 but improved more than one point.
- Education and Health Services led sectors for the 18th consecutive month at 100.64, while Financial Activities remained above 100 at 100.30.
- Manufacturing fell -0.73 pts to 98.32, ranking last among sectors and sitting below 99 across all regions.
- Construction rose to 99.36 (+0.68 pts), with gains reported in every region.
US small business hourly earnings growth rose to 2.66% YoY in November (from 2.58% in October), marking a slight pickup while remaining below 3% for a 16th straight month.
- One-month annualized hourly earnings growth increased to 3.23%, the highest since February, indicating firmer short-term momentum than the 12-month rate.
- Weekly earnings growth strengthened to 2.76%, the highest level of 2025 so far, showing broader improvement in total pay.
- The Midwest led regions for hourly earnings growth at 3.01%, and its one-month annualized pace exceeded 4%, highlighting relative regional strength.
- The South recorded the weakest hourly earnings growth at 2.43% for the sixth straight month, though it led regions in weekly hours worked growth at 0.31%.
- Indiana ranked first among states with 4.00% hourly earnings growth and 5.13% weekly earnings growth; its one-month annualized hourly and weekly earnings gains surged to 7.52% and 9.98%.
- Illinois (3.57%) and Michigan (3.29%) followed Indiana among states, reinforcing the Midwest's strong wage performance.
- Maryland (1.58%), Massachusetts (1.96%), and Virginia (1.99%) posted the slowest hourly earnings growth, underscoring regional divergence.
- Other Services (3.18%) led sectors for hourly earnings growth, with one-month annualized growth spiking to 6.10%, while Education and Health Services (2.32%) remained the softest sector for a fourth consecutive month.
The Paychex Small Business Jobs Index fell -0.25 pts to 99.27 in October 2025, the lowest reading since March 2021, reflecting a modest cooling in small business job growth nationwide.
- The index has remained within one percentage point for the past year, signaling stability but little momentum in hiring.
- The Midwest (99.77) led regions for the 17th consecutive month, while the West (98.31) remained the weakest, down -1.12 pts over the past quarter and below 100 for 19 straight months.
- The South (99.66) was the only region to post a monthly gain, rising +0.05 pts, while other regions weakened.
- North Carolina (101.48) topped states for small business employment growth, supported by strong gains in Leisure & Hospitality (103.31) and Construction (103.05).
- Ohio (100.66) ranked second and has remained in the top two states for seven months, while Tennessee (97.68) ranked last and was down -3.41 pts YoY.
- Washington (98.09) and California (98.17) continued to post declines, placing just above Tennessee.
- Education & Health Services (100.59) led sectors for the 17th straight month, with both Educational Services (100.66) and Health & Social Assistance (100.58) showing YoY gains.
- Manufacturing (99.05) posted the strongest one-month improvement (+0.87 pts), led by more than one-point gains in the South and West.
- Professional & Business Services (98.63) fell -1.0 pt, its steepest monthly decline since December 2021, while Construction (98.68) continued to soften, with the West region falling nearly -2 pts to 95.83.
US small business hourly earnings growth held at 2.58% YoY in October 2025, remaining below 3% for a 15th straight month and reflecting sustained moderation in wage pressures.
- One- and three-month annualized hourly earnings growth came in at 2.35% and 2.29%, both slightly below the 12-month rate, suggesting limited near-term momentum.
- Weekly earnings growth rose to 2.94%, the strongest since January 2024 (3.07%), indicating steady gains in total pay.
- Weekly hours worked increased +0.44% YoY, the largest gain since April 2021, while one-month annualized growth (3.56%) exceeded 3% for the second straight month, the first such stretch in nearly a decade.
- The Midwest led regions for hourly (2.85%), weekly (3.44%), and hours worked (0.58%) growth, while the South (2.41%) had the lowest hourly growth for the fifth consecutive month.
- Illinois (3.50%) topped states for hourly earnings growth, followed by Indiana (3.17%), which also posted one-month annualized growth of 5.95%.
- Michigan (4.34%), Indiana (4.30%), and Illinois (3.86%) led states for weekly earnings growth, while New York (-0.02%) and California (-0.10%) were the only states with negative hours worked growth.
- Manufacturing continued to lead sectors for a second month with hourly (3.03%), weekly (3.82%), and hours worked (0.61%) growth, while Education & Health Services (2.21%) remained the weakest sector for both hourly and weekly gains.
- Leisure & Hospitality recorded hourly growth of 2.29%, near its 2025 average, while weekly earnings improved to 2.91% as hours worked stayed positive since April.
The Paychex Small Business Jobs Index fell -0.31 pts to 99.52 in September 2025, the lowest level since March 2021, and was down -0.32 pts YoY, reflecting slower but steady small business job growth.
- Midwest (100.02) remained the top-performing region for the 16th straight month, while the West (98.82) stayed below 100 for an 18th month, though losses have moderated.
- The South (99.61) recorded the weakest 1-, 3-, and 12-month change rates among regions, indicating broad softness.
- Ohio (100.87) led all states in September and, alongside Indiana (100.64), was the only Midwest state with YoY job gains.
- Washington (98.34) rebounded +0.60 pts but remained the weakest state, followed by Maryland (98.52) and California (98.75), which has stayed out of the top half since March 2022.
- Education & Health Services (101.06) led sectors for the 16th consecutive month, followed by Financial Activities (100.10) as the only other sector with YoY job gains.
- Leisure & Hospitality (98.70) has remained below 99 since June 2024, while Construction (98.88) fell under 99 for the first time since March 2021.
- Manufacturing (98.18) ranked last among sectors, though its 2025 YTD average still outpaces 2024 levels.
The Paychex Small Business Jobs Index held steady at 99.83 in August 2025, essentially unchanged MoM (+0.01 pts), over the last quarter (+0.02 pts), and YoY (-0.06 pts), signaling stable small business job growth.
- The Midwest (100.29) remained the top-performing region for the 15th consecutive month, while the South rose +0.46 pts to 100.16 (its 2025 high) and the West declined -0.51 pts to 98.92, the weakest regional reading.
- Texas surged +1.13 pts to 101.80, ranking first among states and marking its fastest pace of job growth since March 2024; Dallas (101.04) led all metros, with Houston (100.90) close behind.
- California slowed to 98.81, keeping it outside the top half of states since March 2022, while Washington fell to last at 97.74, its lowest level since March 2021.
- Education & Health Services (101.28) was the strongest sector across all regions and has led national small business job growth for 15 consecutive months.
- Manufacturing (99.20) improved +0.58 pts MoM and is the only sector with 2025 YTD growth (98.72) above its 2024 average (98.65), while Leisure & Hospitality (98.27) remained the weakest sector for the 15th straight month.
US small business hourly earnings growth slowed to 2.58% YoY in August 2025 (from 2.74% in July), the weakest pace since December 2020 and the 10th straight month below 3%.
- One- and three-month annualized hourly earnings growth fell to 1.41% and 2.18%, respectively, their lowest levels since 2020.
- Weekly earnings growth rose to 2.82% YoY, extending a seven-month upward trend since January’s six-year low of 2.27%.
- Weekly hours worked declined -0.28% YoY, with July revised down to -0.07%; one-month annualized growth dropped to -2.12%.
- Regionally, the West led hourly earnings growth at 2.79%, while the Midwest topped weekly earnings at 3.01%; the South trailed at 2.58%.
- By state, Washington led hourly earnings growth (3.77%) but had the weakest hours worked (-0.67%) and jobs index (97.74); Michigan posted the strongest gains in weekly earnings (4.34%) and hours worked (0.83%).
- Manufacturing led sectors for hourly (3.05%) and weekly earnings growth (3.55%), while Construction stayed above 3% for the 49th straight month; Leisure & Hospitality remained the weakest at 2.31%.
The Paychex Small Business Jobs Index rose 0.17 pts to 99.82 in July, matching the 2025 YTD average and just -0.05 pts below its level from July 2024.
- The Midwest (100.33) led all regions for the 14th straight month; the South (99.70) stayed below 100 for a third month.
- Leisure and Hospitality (97.16) remained the weakest sector in the South, as it has for 13 of the past 14 months.
- Tampa (100.76) topped all metros for the first time since March 2021, continuing its post-hurricane recovery.
- Boston (100.60) posted the biggest MoM gain (+1.40 pts), its best performance in over four years.
- West Coast metros Riverside (98.24), San Francisco (98.40), and Seattle (98.74) had the lowest metro index levels in July.
Hourly earnings growth for US small business workers held at 2.74% YoY in July, marking the ninth consecutive month below 3%.
- Weekly earnings growth rose to 2.76% YoY, the highest since January and up steadily for six straight months.
- Weekly hours worked turned positive at 0.11% YoY, the first increase since August 2024; one-month annualized growth jumped to 2.32%.
- The Midwest led all regions in hourly earnings (2.82%), weekly earnings (2.97%), and weekly hours worked (0.13%).
- "Other Services (except Public Administration)" posted the strongest hourly earnings growth by sector at 3.33%, followed by Construction at 3.22%.
- Leisure and Hospitality remained the weakest sector at 2.47% hourly earnings growth for the sixth straight month.
The Paychex Small Business Jobs Index slipped -0.16 pts to 99.65 in June, marking another month of modest cooling in small business employment growth. The index is down -0.64 pts over the last 12 months.
- The Midwest (100.15) led all regions for the 13th consecutive month, though all regions saw MoM declines; the West (98.89) was the weakest and fell below 99 for the first time since March 2021.
- Ohio (101.04) topped all states, while Washington (98.06) and California (98.66) were the only states below 99, with Washington posting the largest one-month drop in nearly four years (-2.27 pts).
- Education and Health Services (101.23) remained the top-performing sector for the 13th straight month despite the sharpest MoM decline (-0.48 pts).
- Leisure and Hospitality dropped further to 97.76, its lowest level since March 2021.
- Construction rose to 99.97, just under its 2025 YTD average, while Manufacturing gained +0.40 pts MoM to 98.80—the largest monthly increase among sectors.
Hourly earnings growth for US small business workers held steady at 2.79% YoY in June, remaining just below 3% for the 10th time in the past 11 months.
- Weekly earnings growth rose to 2.58% YoY, the fifth consecutive monthly increase, while weekly hours worked remained negative at -0.12% YoY.
- The Midwest led hourly earnings growth at 2.91%, with Tennessee (4.59%) topping all states for the 8th straight month.
- Tennessee also led in weekly earnings growth (4.79%) and was second in weekly hours worked growth (0.18%).
- Construction led sectors in hourly earnings growth at 3.27%, while Leisure and Hospitality remained lowest at 2.52% despite showing improvement.
- Manufacturing posted the strongest weekly earnings growth among sectors at 3.47% for the fourth straight month.
The Paychex Small Business Jobs Index edged down -0.21 pts to 99.81 in May, indicating largely unchanged small business employment growth.
- The Midwest (100.19) remained the strongest region for the 12th straight month and the only one above 100.
- Texas (101.20) reclaimed the top spot among states, while California (99.36) remained below 100 for the 14th consecutive month despite modest gains.
- Education and Health Services (101.71) led all sectors for the 12th month, continuing four years of strong job growth.
- Construction dropped -0.68 pts to 99.69, its lowest reading since March 2021.
- Leisure and Hospitality remained the weakest sector for the fourth straight month at 98.18.
Hourly earnings growth for US small business workers slowed to 2.77% YoY in May, marking a new 4-year low and continuing a steady decline in wage growth.
- The 3-month annualized hourly earnings growth dropped to 2.45%, its lowest since Dec 2020, while weekly earnings growth rose to 2.59% YoY, extending a 4-month uptrend.
- Weekly hours worked remained negative YoY at -0.21%, with only 3 of the past 48 months showing growth.
- The Midwest led regions in hourly (3.06%) and weekly (2.79%) earnings growth; the Northeast ranked last in both categories.
- Tennessee (4.74%) topped states for hourly earnings for the 7th straight month, while North Carolina (1.44%) and Maryland (1.82%) were the weakest.
- Other Services (3.37%), Construction (3.25%), and Manufacturing (3.05%) led sectors in hourly earnings; Leisure and Hospitality fell to last at 2.11%, its lowest since July 2015.
The Paychex Small Business Jobs Index rose 0.27 pts to 100.02 in April, reaching its highest 3-month growth rate since February 2023 and showing only a -0.10 pt YoY decline.
- The Midwest led all regions for the 11th straight month at 100.77, gaining 0.81 pts MoM and remaining the only region with YoY growth.
- The West (99.53) stayed below 100 for the 13th month, with no meaningful change MoM, QoQ, or YoY.
- Education and Health Services (101.16) remained the top-performing sector for the 11th month in a row.
- Professional and Business Services jumped 0.82 pts to 100.36, the strongest monthly sector gain.
- Leisure and Hospitality rose 0.78 pts to 98.63 but stayed last among sectors for the third straight month, continuing its post-pandemic slowdown.
Hourly earnings growth slowed to 2.82% YoY in April, the lowest since May 2021, with one-month annualized growth (2.41%) falling below the annual rate for the first time in 2025.
- Weekly earnings growth rose to 2.54% YoY, with 3Mo annualized growth hitting a 2-year high of 3.80%.
- Weekly hours worked remained negative YoY at -0.17%, despite a one-month annualized gain of 2.62%.
- The West led all regions in hourly earnings growth (3.04% YoY) for the 25th consecutive month, while the Northeast ranked last (2.68%) but led in weekly hours worked (0.12% YoY).
- Other Services topped sectors in hourly earnings growth at 3.38%, but weak hours worked (-0.54% YoY) kept weekly earnings under 3% for 11 consecutive months.
- Construction and Manufacturing led sectors in weekly earnings growth at 3.44% YoY; Leisure and Hospitality remained last in hourly earnings (2.16%), its lowest since July 2015.
The Paychex Small Business Jobs Index fell -0.29 pts to 99.75 in March, slightly below the pace set at the end of the past two quarters.
- The national jobs index decelerated -1.10 ppts over the past year, equal to the average slowdown during the past year and half.
- The jobs index in all four regions landed below 100 in March for the first time in four years. Texas (100.85) continued to lead states for small business job growth in March.
- Education and Health Services (101.34) continued as the top sector for small business job growth for the 10th consecutive month in March.
- Last among sectors for small business employment growth, Leisure and Hospitality slowed to 97.85 March. Following several years of strong, post-pandemic growth, Leisure and Hospitality has reported < 99 since June 2024.
- Manufacturing (99.30) has gained 1.05 ppts during Q1 2025, best among sectors.
Small business hourly earnings growth accelerated from an 1-month annualized rate of 3.29% in February to 3.51% in March, outpacing annual growth for the fourth straight month.
- Weekly earnings growth (2.49% YoY) increased in March as one-month annualized growth (4.41%) reached a two-year high.
- Weekly hours worked growth decreased -0.36% YoY in March as weekly hours worked are reporting below pre-pandemic levels in 2025.
- The West (3.18% YoY) led regions for hourly earnings growth for the 22nd-straight month and has reported above three percent since February 2021.
- Construction (3.43% YoY) continued as the top industry for hourly earnings growth again in March and was the only sector to report positive weekly hours worked growth (0.07% YoY).
- Leisure and Hospitality (2.22% YoY) ranked last among sectors again in March and slowed to its lowest level in nearly a decade (2.14% YoY in July 2015). The industry was also the only sector to report a negative one-month annualized weekly hours worked growth rate in March.
- Manufacturing topped weekly earnings growth among sectors (3.13% YoY) as one-month annualized growth (5.11%) reached its highest level since September 2022.
The Small Business Jobs Index improved 0.36 pts to 100.04, the first increase and the first > 100 reading since October 2024 and the largest since May 2024.
- At 100.04 in February 2025, small business employment growth was 0.63 pts off the pace set last year (100.67).
- All regions saw gains over the month with the largest being the South region, up 0.72 pts since 100.09.
- Education and Health Services (101.60) continued as the top industry for small business job growth for the ninth consecutive month in February.
- Manufacturing (99.52) gained 2.39 pts in February, representing the strongest one-month increase since April 2021. Manufacturing remained below 100, but has the best one-, three-, and 12-month change rates among sectors.
- Job growth in Leisure and Hospitality slowed -0.73 pts to 98.01 in February, which ranked last among sectors. Leisure and Hospitality has reported an index level below 99 for the past nine months.
Small business wage growth accelerated from an annualized 1-month rate of 2.99% in January to 3.62% in February, an 18-month high.
- The 3-month annualized rate grew from 2.85% previously to 3.19%, and the annual rate was basically unchanged at 2.92%.
- Weekly earnings growth (2.31%) increased for the first month since August 2024, while one-month annualized weekly earnings growth (3.84%) reported a two-year high.
- Weekly hours worked growth decreased -0.72% YoY in February, as weekly hours worked fell to 32.18, the lowest level since April 2014.
- Construction (3.29%) regained its top rank among industries for hourly earnings growth in February, followed closely by Other Services (3.27%) and Manufacturing (3.21%).
- Leisure and Hospitality (2.48%) landed last among sectors for hourly earnings growth in February for the first time since April 2015 and was the only sector with 1- and 3-month annualized hourly earnings growth below two percent in February.
- All sectors reported negative weekly hours worked growth in February, with Construction ranked first (-0.15%) and Education and Health Services (-0.84%) ranked last.
The Paychex Small Business Jobs Index fell further by -0.21 to 99.68 in January, down -1.01 pts from a year ago.
- This is the sixth month out of the last seven to be below 100.
- All four regions fell with the South region down the most, down -1.75 to 99.37.
- Education and Health Services (101.72) continued as the top sector for small business job growth for the eighth-straight month in January.
- Financial Activities fell -1.45 pts in January to 99.58, its lowest level since June 2021.
- Leisure and Hospitality (98.74) has reported below 99 for seven consecutive months.
- Ranked last among sectors again in January, Manufacturing (97.13) slowed -1.12 pts to its lowest level since March 2021.
Hourly earnings growth moderated further to 2.87% YoY in January, down from 2.94% YoY in December.
- The three-month annualized growth has been below 3% since May 2024.
- Weekly earnings growth has quickly decelerated in recent months to 2.12% YoY in January 2025 – its lowest level since January 2019 (2.10% YoY). One-month and three-month annualized growth also both reported below one percent.
- At 3.21% YoY in January, Manufacturing led sectors for hourly earnings growth for the first time since February 2014.

Publications

U.S. Small Business Employment Remains Consistent Throughout 2025

Jan 06, 2026

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U.S. Small Business Employment Sees Modest Uptick in November

Dec 02, 2025

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U.S. Small Business Employment Growth Remains Consistent as Weekly Hours Worked Reach Near-Decade High

Nov 04, 2025

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Minimal Shifts in U.S. Small Business Employment in September

Sep 30, 2025

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Hourly Wage Growth Among U.S. Small Business Workers Near Five-Year Low

Sep 02, 2025

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U.S. Small Business Employment Holds Steady Through First Half of 2025

Jul 01, 2025

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U.S. Small Business Job Growth Remains Largely Unchanged in May

Jun 03, 2025

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U.S. Small Business Job Growth Remains Consistent in April

Apr 29, 2025

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Paychex Small Business Jobs Index Shows Little Change in March and Levels Consistent with Last Several Quarters

Apr 01, 2025

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U.S. Small Business Employment Remains Stable in February

Mar 04, 2025

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Job Growth in U.S. Small Businesses Continues the Pace Seen in the Back Half of 2024

Feb 04, 2025

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Pace of U.S. Small Business Job Growth Moderated in 2024

Jan 08, 2025

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U.S. Small Business Job Growth Rate Remained Steady in November

Dec 03, 2024

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Small Businesses Continue to Show Moderate Job Growth in October

Oct 29, 2024

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Job Growth Moderates Slightly for U.S. Small Businesses in September

Oct 01, 2024

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