Small Business Job Growth Strong in First Quarter

Small business job growth started 2016 with a bang, marking the best three-month increase in two years, according to the Paychex | IHS Small Business Jobs Index. The uptick was generally widespread across the country, and a number of individual states and metro areas saw job growth trends that indicate strong gains to begin the year.

Each month, Paychex and IHS measure the change in small business employment in the U.S., analyzing year-over-year worker count changes and trending the results to reveal movement. As we look back on Q1, let’s examine some of the data highlights.

National Scope

The pace of small business job growth improved 0.36 percent during the first three months of the year. The index held steady in March following gains in January and February to close the first quarter of 2016 just 0.05 lower than last year.

Regional Analysis

The pace of small businesses employment increased 1.40 percent in the East South Central region, the fastest growth among regions. Both the South Atlantic and Middle Atlantic regions improved solidly. After trending below the national baseline (100) all of 2015, the Middle Atlantic jumped above 100 in January as small businesses conditions strengthened further in February and March as well.

The West Central and Mountain were the only regions where small business employment growth slowed during the first quarter.

State Analysis

With the best growth rate in March as well as Q1 overall, Virginia climbed into the top 10 among states at 100.88. With three monthly gains totaling just over 1 percent, the Ohio index (100.66) is up to its highest level in more than three years and back above the national baseline.

Texas continues to be one of the strong metro indices, yet has slid 0.93 percent, mainly due to sizable drops in Dallas. Illinois fell below the national baseline for the first time in five years, as the pace of small business gains slowed 0.76 percent.

Metro Analysis

Reaching an index level of 104.01, Seattle improved 1.35 percent from December 2015 to March 2016, and overtook Dallas as the top metro index. Houston’s small business employment conditions also improved, by 0.29 percent.

The Chicago metro dropped below 100 for the first time since March 2011, as small business employment slowed 0.79 percent to start the quarter. Also dropping was Dallas metro, which fell 2.97 percent, reserving the trend of 2015.

Industry Analysis

Construction small business job gains continues at a strong pace, 102.22 in March, as the growth rate increased 0.55 percent during the last three months. At 101.13, the pace of employment growth in Education and Health Services is at its strongest level in more than two years, as the industry has gained 0.69 percent.

While most industries improved during the first three months of the year, Manufacturing did not and remains the lowest industry at 98.94.

As you can see, the first three months of 2016 featured a continued expansion of small business jobs growth. While we expect business owners will continue to look at additional options for hiring, such as part-time and contract workers, the overall expansion of small business jobs during Q1 is a positive sign that the year is off to a solid start.

Frank Fiorille is senior director of risk management for Paychex, a leading provider of human capital management solutions for payroll, HR, retirement, and insurance services.

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