The CBIZ Small Business Employment Index reported an increase in hiring as small businesses continue to navigate through a tight labor market

The CBIZ Small Business Employment Index (“SBEI”) reported a seasonally adjusted increase of 1.34% in May. Small businesses remain focused on hiring and retaining talent as demand increases in the summer season. The CBIZ SBEI tracks payroll and hiring trends for over 3,200 companies that have 300 or fewer employees, providing broad insight into small business trends.

“The reading for May reflects the general pattern of strengths and weaknesses in the economy,” said Anna Rathbun, CFA, Chief Investment Officer, CBIZ Investment Advisory Services, LLC. “Small manufacturing and tech businesses are trying to control costs as they face continuing challenges, meanwhile service-oriented sectors are continuing to see job gains due to labor shortages in these areas.”

The Bureau of Labor Statistics’ employment report indicated hiring growth that beat expectations. The May reading showed an overall increase of 339,000 private-sector jobs. Even with the overall hiring growth, the national unemployment rate increased to 3.7%. The report is inclusive of all non-farm private employers across businesses of all sizes. Similarly, the ADP employment report indicated hiring growth among small, medium-sized and large companies. Its May reading showed an overall increase of 278,000 private-sector jobs for the month. Small businesses accounted for an increase of 235,000 of those jobs on a seasonally adjusted, month-over-month basis. The ADP report counts small businesses as companies with 49 or fewer employees, while the CBIZ SBEI uses data from companies with 300 employees or fewer.

On a regional level, the CBIZ SBEI data reported the largest increase in hiring in the Northeast (2.37%) followed by the Central (1.61%) region. The Southeast (0.36%) experienced a slight increase, while the West (0.02%) region remained flat.

The most notable job gains were seen in Accommodation and Food Services; Administration and Support Services; Arts, Entertainment, and Recreation; and Rental and Leasing Services. Industry decreases were observed in Manufacturing, Mining, Not-for-Profit, and Technology and Life Sciences.

Rathbun added, “American manufacturing has experienced a contraction in activity for several months now and the May report reflects some of the decisions small companies have implemented to manage costs. On the other hand, the multi-family housing market is seeing some activity as the school year comes to a close and any planned moves are starting to take place leading to job gains in those sectors.”

To view an infographic with data from the employment index, visit the CBIZ website.

Additional takeaways from the May SBEI include:

May's snapshot: 24% of companies in the index increased staffing, 59% made no change to their headcounts and 17% reduced employment totals.

Industries at-a-glance: Accommodation and Food Services, Administration and Support Services, Arts, Entertainment, and Recreation, and Rental and Leasing Services experienced hiring gains. Decreases were seen in Manufacturing, Mining, Not-for-Profit, and Technology and Life Sciences.

Geographical hiring: The Northeast (2.37%) Central (1.61%) Southeast (0.36%) regions reported job gains followed by the West (0.02%) which remained flat.

What’s next? With inflation still an issue and recessionary winds impacting sentiment, small business owners may be finding ways to manage costs. But with the tight labor market presenting a unique challenge, staffing may not be a cost management lever.

The May CBIZ SBEI data follows the Q2 2023 release of the CBIZ Main Street Index, which surveyed over 700 businesses throughout the U.S. as they navigate the challenging economic environment.* The data revealed that confidence among small to midsize businesses is waning, as 51% of respondents have a negative or neutral outlook on the economy. Please see the CBIZ Main Street Index webpage for an interactive infographic with additional data.

*Note: Not all of those surveyed in the CBIZ Main Street Index are clients of CBIZ.

Editor’s note:

(1) The SBEI illustration is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License. Based on our work at https://www.cbiz.com.

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About CBIZ

CBIZ is a leading provider of financial, insurance and advisory services to businesses throughout the United States. Financial services include accounting, tax, government health care consulting, transaction advisory, risk advisory, and valuation services. Insurance services include employee benefits consulting, retirement plan consulting, property and casualty insurance, payroll, and human capital consulting. With more than 120 offices in 32 states, CBIZ is one of the largest accounting and insurance brokerage providers in the U.S. For more information, visit https://www.cbiz.com.

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