The latest Paychex | IHS Markit Small Business Employment Watch shows that employment growth moderated as new COVID-19 hot spots emerged in the South and West regions of the U.S. The national jobs index slipped 0.24 percent in July to 94.59. Hourly earnings growth also slowed slightly to 3.29 percent last month, but increasing hours worked, spurred by the shifting workforce composition, drove weekly earnings growth up to 4.14 percent, with one-month and three-month annualized growth rates topping five percent.

"The jobs index fell slightly in July as a number of states were forced to backtrack on early reopenings," said James Diffley, chief regional economist at IHS Markit.

"The rebound in small business job growth has slowed mostly in regions where there has been a recent surge in cases," said Martin Mucci, Paychex president and CEO. "We're closely monitoring the status of the next expected stimulus bill for additional relief measures that may be necessary for many small businesses in the months ahead."  

The report also includes regional, state, metro, and industry level analysis, showing:

• The South and West reported the largest declines in employment growth, -0.31 percent and -0.33 percent, respectively.

• Despite slowing 0.44 percent in July, Florida continues as the top state for small business employment growth.

• Small business jobs growth in Seattle declined 1.89 percent in July as its index fell to 91.05, lowest among all U.S. metros.

• The Financial Activities industry sector, which includes financial services, insurance, and real estate, was the only sector to experience improved rates of small business employment growth in July and is ranked second behind Construction.

The complete results for July, including interactive charts detailing all data at a national, regional, state, metro, and industry level, are available at www.paychex.com/employment-watch. Highlights are available below. 

National Jobs Index

• The national index slipped 0.24 percent in July, dropping slightly below April's level to 94.59.

• After falling 3.65 percent in April, the jobs index has moved just -0.04 percent during the past quarter.

• At 94.59, the national index has slowed 3.65 percent since last year.

National Wage Report

• Up 1.34 percent year-over-year, weekly hours worked moved higher again as the composition of the workforce continues to change with employers relying more heavily on higher wage earners.

• Weekly earnings growth increased to 4.14 percent, with one-month and three-month annualized growth rates topping five percent.

• Hourly earnings growth slowed slightly to 3.29 percent in July, the first decline since the beginning of the coronavirus pandemic.

Regional Jobs Index

• Coinciding with surging cases, the South and West reported the largest declines in employment growth, -0.31 percent and -0.33 percent, respectively.

• Employment growth in the Northeast has registered historic lows for two consecutive months, down 0.24 percent in June and another 0.22 percent in July.

• The Midwest demonstrated the greatest stability in July, moderating just -0.04 percent.

Regional Wage Report 

• The Northeast leads regional hourly earnings growth at 4.38 percent, and more than six percent annualized during the last quarter.

• At 2.51 percent, the South trails all regions in hourly earnings growth.

• The South has both the weakest hourly earnings and hours worked growth among regions.

State Jobs Index

• Despite slowing 0.44 percent in July, Florida continues as the top state for small business employment growth.

• Washington's index fell 1.84 percent in July, hitting a record low of 91.79.

• After Washington, New York and Massachusetts are the weakest states for small business employment growth.

Note: Analysis is provided for the 20 largest states based on U.S. population.

State Wage Report

• New Jersey leads all states in hourly earnings growth, followed by Pennsylvania and Massachusetts.

• Texas has the weakest growth rates among states for both hourly earnings and hours worked.

• New York ranks first among states in weekly hours worked growth, 2.54 percent year-over-year.

Note: Analysis is provided for the 20 largest states based on U.S. population.

Metropolitan Jobs Index 

• At 97.98, Denver became the top metro for small business employment growth, replacing Tampa, which fell 1.31 percent to 97.07.

• Seattle slowed 1.89 percent in July as its index fell to 91.05, more than one point lower than the next lowest index, San Francisco (92.40).

Note: Analysis is provided for the 20 largest metro areas based on U.S. population.

Metropolitan Wage Report

• Hourly earnings growth in both Houston and Dallas is below one percent from a year ago.

• Baltimore and Philadelphia have surged above five percent hourly earnings growth, trailing only Riverside, California (5.84 percent).

 Note: Analysis is provided for the 20 largest metro areas based on U.S. population.

Industry Jobs Index

• At 97.89, Construction leads small business employment growth and has regained 1.38 percent during the past quarter.

• The Financial Activities industry sector, which includes financial services, insurance, and real estate, was the only sector to experience improved rates of small business employment growth in July and is ranked second behind Construction.

Note: Analysis is provided for seven major industry sectors. Definitions of each industry sector can be found here. The Other Services (excluding Public Administration) industry category includes religious, civic, and social organizations, as well as personal services, including automotive and household repair, salons, drycleaners, and other businesses.

Industry Wage Report 

• Education and Health Services shows the weakest earnings growth among sectors.

• Other Services (except Public Administration) leads sectors in both earnings and hours worked growth.

Note: Analysis is provided for seven major industry sectors. Definitions of each industry sector can be found here. The Other Services (excluding Public Administration) industry category includes religious, civic, and social organizations, as well as personal services, including automotive and household repair, salons, drycleaners, and other businesses.

For more information about the Paychex | IHS Markit Small Business Employment Watch, visit www.paychex.com/employment-watch and sign up to receive monthly Employment Watch alerts.

*Information regarding the professions included in the industry data can be found at the Bureau of Labor Statistics website.