PYMNTS-MonitorEdge-May-2024

New Jobs Data Shows Continued SMB Hiring Squeeze

Small businesses appear to be pulled in two different directions.

On the one hand, the latest payroll data show job growth continues, with small firms reporting confidence in the overall economy and their ability to grow with it. On the other hand, however, geopolitical volatility and a hiring squeeze from low unemployment have small business owners struggling.

“An organization’s talent is often a company’s only differentiator,” said Anne Tate, director, PEO, Centralized Service at Paychex company Oasis, in a statement announcing the firm’s latest data on small business hiring. “High-performing employees always have options to move.”

Separately, Moody’s Analytics Chief Economist Mark Zandi reflected on what Yahoo Finance reports described as the “alarming rate” at which small businesses have shed jobs.

“Small businesses are suffering the brunt of the slowdown,” Znadi told the publication. “Hampering job growth are labor shortages, layoffs at brick-and-mortal retailers, and fallout from weaker global trade.”

CBIZ Employee Benefits drew similar conclusions with its new report, with the firm’s Executive Vice President Phil Noftsinger highlighting the tight labor market as a major source of pain for small business owners.

“Essentially, the employable population needs to increase, or we will continue to see flat numbers for the rest of the year,” he said in a statement, referencing CBIZ’s flat small and medium-sized business (SMB) jobs growth data.

At the same time, however, new research from SMB Economic Insights and marketplace lending platform Lendio suggests small businesses aren’t willing to accept defeat; according to Lendio CEO and Founder Brock Blake, the survey’s findings, “particularly the growth in loan inquiries, number of loans funded and the average loan amount, show that business owners are still optimistic and hungry for growth.”

And according to another report, there may be an interesting knock-on effect of a tight labor market on small businesses: a surge in franchise jobs.

PYMNTS takes a look at the latest data on jobs, economic outlook, borrowing and overall small business sentiment, below.

156,000 non-farm jobs were added in July, ADP’s latest data revealed. But small businesses did not benefit from that gain: small businesses shed 18,000 jobs during the month, a squeeze analysts warn has also led to downward pressure on wages.

The national unemployment rate is 3.7 percent, according to the U.S. Labor Department, which also calculated 164,000 jobs gains in July. Analysts agree the low unemployment rate is putting a particularly intense squeeze in small business owners.

Small businesses decreased hiring in July by a rate of 0.43 percent, CBIZ’s Small Business Employment Index revealed. Its survey of small firms with 300 or fewer employees concluded that this trend was as expected considering the tight labor market. One-quarter of small businesses analyzed decreased their company head counts between June and July, researchers found.

41,900 jobs were gained at franchised establishments in July, the ADP National Franchise Report found. Restaurants hired the vast majority of those positions, though not all in the franchise world saw such a surge: according to researchers, lodging saw no gains in jobs in July.

58 percent of small businesses say they worry about losing top talent, Oasis analysis reveals. Further, 62 percent of SMBs agreed that they find it difficult to fill important roles within their companies. The report surveyed 319 small businesses in the U.S. and concluded that SMBs must deploy a combination of internal and external resources to hire qualified staff — and keep them.

21 percent more loan volume landed at small businesses in Q2, new Lendio data revealed, noting that funding payroll increased by 33 percent in the quarter, compared to the 15 percent increase in financing used for working capital, and the 14 percent used to finance equipment purchases. The statistic may suggest that, in a tight labor market, small business owners are prioritizing investing in their employees.

PYMNTS-MonitorEdge-May-2024