The CBIZ Small Business Employment Index reported weakness in what should be a robust season for the small business labor market

The CBIZ Small Business Employment Index (“SBEI”) reported a seasonally adjusted decrease of 1.00% in July, marking the second straight month of job losses during a time of year that typically sees robust employment gains. The CBIZ SBEI tracks payroll and hiring data for over 2,900 companies that have 300 or fewer employees, providing broad insight into small business trends.

The Bureau of Labor Statistics’ employment report indicated hiring growth that missed expectations. The July reading showed an overall increase of 114,000 private-sector jobs. The national unemployment rate rose to 4.3%. The report is inclusive of all non-farm private employers across businesses of all sizes. Similarly, the ADP employment report indicated hiring growth among medium and large-sized companies. Its July reading showed an overall increase of 122,000 private-sector jobs for the month. Despite overall growth, small businesses experienced a decrease of 7,000 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.

“For some time, we have observed a divergence in labor market data. While recent BLS data has shown positive trends due to their lagging models, recent reports have started to reflect a more disappointing reality,” said Anna Rathbun, CFA, Chief Investment Officer, CBIZ Investment Advisory Services, LLC. “This week, we saw the JOLTS quit rate signal an insecure workforce, the ADP jobs number miss expectations, and our SBEI data indicate a downside trend, with the BLS numbers finally aligning with other labor market sources. Although the labor market remains stable with a historically low unemployment rate of 4.3%, the critical question now is whether the rate of change will accelerate in the wrong direction.”

Regionally, the West (-5.54%) saw the largest decrease in hiring, followed by the Central (-1.44%) and Southeast (-0.11%) regions. The Northeast (1.15%) was the only region to experience hiring gains.

On an industry level, Management, Mining, and Utilities saw an increase in hiring. Educational Services, Not-for-Profit, and Transportation reported the largest job losses.

Rathbun added, “Some people are saying this is a 'correction' following too much hiring after the pandemic rush for skilled workers. While there is probably some truth to that, it also reflects an anchoring bias within the economist community.”

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

Additional takeaways from the July SBEI include:

July’s snapshot: 20% of companies in the index increased staffing, 60% made no change to their headcounts and 20% reduced employment totals.

Industries at-a-glance: In July, 68% of all industries saw job losses, led by Educational Services, Not-for-Profit, and Transportation. Management, Mining, and Utilities experienced hiring gains.

Geographical hiring: The Northeast (1.15%) was the only region to report hiring increases. The West (-5.54%) experienced the largest drop in employment, followed by the Central (-1.44%) and Southeast (-0.11%) regions.

What’s next? Small businesses will need to carefully track economic indicators to navigate potential shifts in the labor market. Despite current stability, there's a growing focus on understanding whether hiring trends will continue to slow, requiring businesses to adapt accordingly.

The July CBIZ SBEI data follows the Summer 2024 release of the CBIZ Main Street Index, which surveyed 549 businesses throughout the U.S. as they navigate the current economic environment.* The Index showed a notable sense of confidence for SMBs, but labor challenges remain the top concern, with two-thirds (62.4%) saying having an adequate number of skilled workers is their biggest issue, up 16% from January 2024.

The data revealed a notable positive shift in economic sentiment, with only 33% reporting concerns about interest rates affecting their bottom line, compared to 61% in the third quarter of 2023.

*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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