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Small Businesses Report Significant Hiring Decline in July

The CBIZ Small Business Employment Index revealed that the majority of industries shed jobs

The CBIZ Small Business Employment Index (“SBEI”) reported a seasonally adjusted decrease of 2.14% in July. This month's reading is a dramatic reversal from the strong hiring reported in June. The CBIZ SBEI tracks payroll and hiring trends for over 3,200 companies that have 300 or fewer employees, providing broad insight into small business trends.

“July’s small business hiring data showed a dramatic reversal from the strong reading that was observed in June,” said Anna Rathbun, CFA, Chief Investment Officer, CBIZ Investment Advisory Services, LLC. “Nearly every industry exhibited some weakness in payroll, which makes us wonder about corrective measures from possible over-hiring in search of skilled workers earlier this year.”

The Bureau of Labor Statistics’ employment report indicated hiring growth that missed expectations. The July reading showed an overall increase of 187,000 private-sector jobs, a more modest number for the second month in a row and prompting the national unemployment rate to dip slightly to 3.5%. The report is inclusive of all non-farm private employers across businesses of all sizes. Meanwhile, the ADP employment report indicated hiring growth among small and medium-sized companies. Its July reading showed an overall increase of 324,000 private-sector jobs for the month. Small businesses accounted for an increase of 237,000 of those jobs on a seasonally adjusted, month-over-month basis. The ADP report counts small businesses as companies with 49 or fewer employees, while the CBIZ SBEI uses data from companies with 300 employees or fewer.

While the Establishment Survey of the BLS report indicates strong job growth in July, the Household Survey (HS) is more in line with the weakness in the labor market reported in the CBIZ SBEI. According to the HS, July saw a decline of full-time workers and an increase of part-time workers, and the total multiple job holders increased as well. This survey is indicative of weakness in the labor market, which shows up in the direct counting of employment in the SBEI.

“The discrepancies in the ADP, BLS, and the SBEI show that there are complexities in the labor market that are not captured through a single methodology,” Rathbun added. “Such diversions can point to a mature leg of an economic cycle.”

Every region in the U.S. experienced job losses in July. The West (-5.55%) reported the most significant decline in hiring, followed by the Central (-2.10%) Southeast (-1.84%) and Northeast (-0.56%) regions.

From an industry perspective, gains in employment were seen in Government, Insurance, Management, and Manufacturing. All other industries experienced job losses, with the most significant declines seen in Accommodations and Food Services, Arts, Entertainment and Recreation, Education Services, and Retail Trade.

Rathbun added, “Job losses seen in recreational and outdoor industries in the middle of the summer are typically unusual. This trend could suggest that the ‘you only live once’ phenomenon may have reached its peak leading to less demand in these industries.”

To view an infographic with data from the employment index, visit the CBIZ website.

Additional takeaways from the July SBEI include:

July's snapshot: 17% of companies in the index increased staffing, 57% made no change to their headcounts and 26% reduced employment totals.

Industries at-a-glance: Government, Insurance, Management, and Manufacturing experienced hiring gains. Decreases were seen in Accommodations and Food Services, Arts, Entertainment and Recreation, Education Services, and Retail Trade.

Geographical hiring: The West (-5.55%) and Central (-2.10%) regions reported the largest declines in hiring in July, followed by the Southeast (-1.84%) and Northeast (-0.56%) regions.

What’s next? Small business hiring in July experienced a dramatic reversal from the strength in hiring observed in June. This could suggest that the trend of small business owners prioritizing their search for skilled workers may be abating.

Editor’s note:

(1) The SBEI illustration is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License. Based on our work at https://www.cbiz.com.

Follow CBIZ on Twitter at @CBZ or on Facebook.

About CBIZ

CBIZ is a leading provider of financial, insurance and advisory services to businesses throughout the United States. Financial services include accounting, tax, government health care consulting, transaction advisory, risk advisory, and valuation services. Insurance services include employee benefits consulting, retirement plan consulting, property and casualty insurance, payroll, and human capital consulting. With more than 120 offices in 32 states, CBIZ is one of the largest accounting and insurance brokerage providers in the U.S. For more information, visit https://www.cbiz.com.

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