What's Happening?
In October, small business employees in the U.S. worked more hours, leading to an increase in their weekly earnings, according to a report by Paychex. Despite a slight slowdown in hourly earnings growth
to 2.58%, the increase in hours worked resulted in higher overall earnings for employees. The Paychex Small Business Employment Watch noted that weekly hours worked rose across all U.S. regions, marking the strongest growth since April 2021. This trend may indicate a positive outlook for small business hiring, as companies often increase hours before expanding their workforce.
Why It's Important?
The increase in hours worked by small business employees is a critical indicator of economic activity and business confidence. As businesses seek to maximize productivity with their current workforce, this trend suggests a potential uptick in economic conditions. For small businesses, which are a significant part of the U.S. economy, this could lead to increased hiring if the positive sentiment continues. However, the moderation in hourly earnings growth highlights ongoing challenges in wage growth, which could impact employee satisfaction and retention. The data also fills a gap left by the absence of the U.S. Bureau of Labor Statistics' monthly jobs report due to a government shutdown, providing valuable insights for economists and policymakers.
What's Next?
Looking ahead, small businesses may continue to increase hours worked as a precursor to hiring more employees, depending on economic conditions and business confidence. The ongoing government shutdown and its impact on the Internal Revenue Service could affect small business operations, particularly in terms of tax guidance and compliance. Businesses and accountants will need to stay informed about developments related to the One Big Beautiful Bill Act and its implications for tax policy. Additionally, the labor market will be closely watched for signs of sustained growth in employment and earnings.
