Small companies determined for employees, whilst firms are slower to rent
While some companies have slowed the pace of hiring due to concerns about an economic slowdown, small business demand for new workers has yet to show any signs of slowing down, said Paychex CEO Marty Mucci.
“We’re still not seeing really strong small business recessionary action here,” Mucci said on CNBC’s “Squawk Box” on Tuesday.
Hiring rates at small US businesses with fewer than 50 employees have slowed for five straight months, according to data from Paychex and IHS Markit, but Mucci said it has more to do with a shortage of applicants than small business retreats.
“The hardest thing for small businesses is that they have the demand and they need workers – they just have a little bit more difficulty finding them,” he said.
This is in contrast to what is happening in some larger companies. According to ADP’s monthly payroll report, personal payrolls increased by 132,000 in August, down from the 268,000 increase in July.
Nela Richardson, ADP’s chief economist, told CNBC that the data “points to a shift towards a more conservative hiring pace, possibly as companies try to decipher the conflicting signals from the economy.”
“We could be at a tipping point, from supercharged job wins to something more normal,” she added.
But ADP data showed that companies with 500 or more employees grew by 54,000 and medium-sized companies by 53,000, while those with fewer than 50 employees grew by 25,000.
A “Now Hiring” sign is installed at a Panda Express restaurant on August 05, 2022 in Marin City, California.
Justin Sullivan | Getty Images
Impact of paying higher wages
Mucci said there are small businesses that are feeling “inflationary pressures on wages”.
Average hourly earnings in August were $30.71, up $1.51 from the same month last year, according to Paychex. Hourly wages rose 5.18% for the month, hitting a record set in May 2011.
The difficulty of both finding workers and having to pay higher wages could lead to a sustained slowdown in hiring activity, Mucci said, adding that “both things are slowing down [hiring] something down.”
According to a recent CNBC/SurveyMonkey small business survey, 50% of small business owners said they had a harder time hiring in the third quarter of 2022 than a year ago, while 28% say they have open positions they’re not filling were able to fill for at least three months. While these numbers are relatively flat from previous quarters, they highlight the hiring difficulties that many small business owners face.
According to the Job Openings and Labor Turnover Survey, there were 11.24 million job openings in July, with the number of vacancies nearly 2 to 1 higher than the available workforce.
August nonfarm payrolls, released by the Bureau of Labor Statistics on Friday, are likely to reinforce the view that demand for hiring remains high.
This labor crisis has forced many small businesses to reduce hours or close on certain days, Mucci said. However, he noted that there are a record number of workers with at least two jobs, according to federal labor data. In July, according to data from the US Bureau of Labor Statistics, there were 433,000 workers with two full-time jobs, compared to 401,000 in July 2021.
“A lot of people are looking for a second job and hopefully small businesses will be the positive recipients of that,” he said.