Small Business Hiring Stalls as Wage Growth Remains Subdued
Event summary
- The Paychex Small Business Jobs Index increased marginally, rising 0.04 percentage points to 99.30 in January 2026.
- Hourly earnings growth for small businesses has remained flat at 2.68% since July 2025.
- Weekly earnings growth slowed to 2.53% in January, with annualized one-month growth below 2% for three consecutive months – a level last seen in December 2020.
- The Midwest continues to lead in small business job growth for the 20th consecutive month, while Education and Health Services have seen growth for nearly five years.
The big picture
Paychex's data indicates a slowing but stable small business employment environment, defying expectations of a more robust rebound following the 2025 tax changes. This suggests that broader macroeconomic headwinds, such as rising healthcare costs and ongoing supply chain disruptions, are offsetting the positive impact of fiscal stimulus. The continued wage stagnation is a key indicator of limited inflationary pressure, but also signals potential challenges for small business profitability.
What we're watching
- Wage Pressures
- The sustained low wage growth, despite anticipated tailwinds from the 2025 tax bill, suggests a continued lack of pricing power for small businesses and potentially muted consumer spending.
- Labor Supply
- The persistent challenges with qualified labor supply, noted by Paychex, will likely continue to constrain small business expansion and necessitate ongoing investment in automation or alternative staffing models.
- Regional Divergence
- The Midwest's continued dominance in job growth warrants further investigation to determine if this is a structural shift or a temporary anomaly driven by localized factors.
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