NEW YORK – Employee wages are one of the biggest costs for small businesses.

A recent survey has shed light on some interesting trends when it comes to wages in the small business sector. While some business owners have noticed a stabilization or slowdown in wage growth, others are still experiencing challenges in managing labor costs.

According to the Paychex Small Business Employment Watch, hourly earnings growth for workers at firms with 50 employees or less dipped to 2.89% in August, marking the first time it has fallen below 3% since January 2021.

John Gibson, the President, and CEO of Paychex, noted, “After holding steady for several months, hourly earnings growth continued to decelerate in August. Falling below three percent for the first time in three years is another notable signal that the labor market is moving closer to its pre-pandemic level.”

John Wilson, owner of Wilson Plumbing and Heating in Akron, Ohio, has seen labor costs comprising a significant portion of his budget. While he has witnessed wage increases over the years, recent job candidates have shown more openness to negotiations, indicating a possible stabilization in wages.

Albert Brenner, owner of Altraco manufacturing in Thousand Oaks, California, highlighted the ongoing challenges in managing labor costs amidst concerns about inflation and supply chain disruptions.

The Paychex data also revealed a one-month annualized hourly earnings growth rate of 1.91% and a national jobs index increase of 0.02 percentage points in August. The index indicates nominal year-over-year job losses, with the national small business jobs index reflecting modest employment growth.

Gibson suggested that the data supports broader trends of a cooling labor market and potential interest rate reductions by the Federal Reserve.

Josh Miller, CEO of Clean Carpets in Austin, Texas, emphasized the competitive labor market for skilled workers in the service sector, leading to sustained wage pressures.

The insights from the Paychex Small Business Employment Watch offer valuable information on wage trends within the small business sector, drawing from the experiences of around 350,000 Paychex clients.