After the election of President Trump in 2016, countless surveys reported increasing small business optimism. Post-election research conducted by Paychex showed similar results. Slightly more than half of respondents (small business owners) felt confident to highly confident in their ability to grow under the Trump Administration and 37 percent expressed moderate confidence. But has that optimism translated to small business employment growth?
To gauge trends in small business employment growth and wages, the monthly Paychex | IHS Small Business Employment Watch tracks small business jobs growth and wage trends on a national, regional, state, metro and industry scale. The report serves as an indicator for the state of small business, and, as small businesses represent nearly 95 percent of all U.S. employers, the economy overall.
In May, data from the Small Business Employment Watch revealed that the Small Business Jobs Index declined for the third consecutive month. After a strong start to the year, the index declined to 100.34, the lowest rate of small business employment growth the country has seen since late 2015, a rate 0.25 percent slower than the pace of small business jobs growth in May 2016. After a steady increase in hiring over the three months immediately following the election (December 2016, January 2017 and February 2017), it seems that small business owners have shifted to a wait-and-see approach.
While many of the policies President Trump proposed during his campaign have small business owners feeling hopeful, there is still a great deal of uncertainty around which policies will ultimately come to pass, including healthcare, tax, and immigration reform, to name a few. As such, small business owners must make business decisions, such as whether or not to add employees, based on uncertain economic and regulatory issues, seemingly leaving many to forego hiring until they have a better idea of what’s to come.
In addition to the uncertainty around regulatory and compliance requirements, small business owners are also keeping a watchful eye on the changing nature of work and the workforce. For example, the past couple years have seen a rise in the number of part-time and freelance workers as part of the “gig” economy, a trend which we’re seeing mirrored among our client base.
We’re in a period when macro-economic trends and policy-related issues are having a greater impact than ever on how small business owners make a variety of business decisions. By keeping an eye on these national trends and topics, in combination with an audit and assessment of a small business’s financial situation, CPAs can help their clients make informed decisions to drive the long-term business growth and success.