Job Growth Continues in South and Major Metros, Government Shutdown Looms
Additional resources: What a Government Shutdown Might Mean
[Gene Marks, host]
Hey, everybody, this is Gene Marks and welcome to another episode of the Paychex Week in Review podcast. Thank you so much for joining us. This is the podcast where we go through a few items in the news that impact your business and talk a little bit about that. So, let's get right to it.
The first news comes from Paychex, actually. U.S. small businesses experienced job growth for all of 2023 and extended a cycle of consistent job growth for 33 straight months, according to December data from the Paychex Small Business Employment Watch.
The Small Business Jobs Index closed the year with a 1.2% growth, while hourly earnings growth for U.S. workers in December was down just a little bit compared to December of 2022.
John Gibson, the CEO Paychex says this: “As the Paychex Small Business Employment Watch has consistently shown all year, the resiliency of the small business community has allowed them to meet the many challenges of 2023 and continue to grow. Wage inflation also continues to slow, indicating that the actions taken by the Fed are having their desired effect on inflation.”
Here's a couple of highlights for you from 2023, okay. So, again, nationally, small businesses experience job growth for all of the year. There was 33 straight months of job growth among small businesses, right. All 20 of the largest U.S. states reported positive job growth to end 2023, and eight of those increased the rate of job growth during 2023. The South led regions in December and had the strongest rate of job growth for 11 of 12 months in 2023, while the West region showed this slowed the most during 2023.
So, the takeaways are this: 2023 was not a bad year for most small businesses. Most businesses were hiring and employment stayed strong, wages themselves showed decent job growth, staying just slightly ahead of inflation. And for those of you guys that are running businesses in the South, it seems like you guys are doing better than most others because you're the ones that are setting up and hiring the most in the country.
So, good for you. A good year-end report of job growth and employment from Paychex. We'll see what happens with next month.
Now, speaking of jobs, last week the Labor Department announced that the country had added 216,000 new jobs in December. It topped the 170,000 gain that was forecasted by a lot of economists and the unemployment rate held steady at 3.7%. So, good job news as well from the federal government in December.
However, you need to take some of that news with a little bit of a grain of salt. More than 86% of the gain for the month came from health care, government, construction and leisure and hospitality. The government accounted for the biggest payroll gains last month, with the sector adding 52,000 jobs in December. Employment continued to trend upward in local government – 37,000 jobs – and the federal government.
In total, the government hired an average of 56,000 workers per month in 2023, more than double the average monthly gains seen the previous years. Now, there are also sizable gains within the leisure and hospitality sector last month, with payrolls growing by 40,000. Nearly all of the hiring was done by bars and restaurants, with employment jumping by 22,000. Hiring in the healthcare sector was the third biggest contributor to the headline Job Gain. The industry onboarded 37,700 employees in December, the biggest gain being in hospitals, home healthcare services, and the office of physicians.
So, look, we realize that all these job gains are really, you know, kind of in specific sectors of the economy. So, we get the fact that although unemployment is low, you can't just say like the entire economy is doing great. I mean, there are some sectors that are doing better than others. But if you're a small business and you're looking for work or you're looking to start up a business, you're looking for opportunities, well, the government is certainly growing, as are retail and restaurants and hotels, as is the healthcare sector. Those are the strongest sectors in the American economy right now. They're the ones that are hiring and adding jobs, and they're the ones that we should be focused on if you want to grow your business.
Finally, as we head into January, new news just came out this week is that congressional leaders did announce a spending deal as a shutdown threat continues to loom. This is from CNN and this is from Monday morning. House and Senate leaders on Sunday announced a spending deal for government funding in 2024. It's a first step into averting a shutdown. These top-line numbers were agreed by House Speaker Mike Johnson and Senate Majority Leader Chuck Schumer. They include a $1.59 trillion in spending for fiscal year 2024 with increases in both defense and non-defense spending.
But there is a warning here. While their agreement on funding levels will reduce the chances of a shutdown, there are still major hurdles facing Congress ahead of two funding deadlines: Jan. 19 and Feb. 2. One of those hurdles is how to deal with demands by conservatives to use the funding bill as leverage to impose more stringent immigration and border security demands.
Congress will have to approve funding bills or at least a stopgap resolution to avoid a shutdown. This is by Jan. 19 and Feb. 2, and it remains uncertain how that effort will play out. The Far-Right House Freedom Caucus called the deal negotiated between the House and Senate leaders a total failure. It presents a challenge for House leaders Johnson, who is leading an extremely narrow majority.
The opposition from the group, which is loud and a strong contingent in the House, makes the goal of averting a government shutdown much more of a headache. Freedom Caucus members have been adamant that spending levels be cut dramatically past what congressional leaders announced earlier this week. So, that's an issue.
So, although it's good news that both House and Senate leaders have made some forward progress in averting this shutdown, we are still a long way from getting out of the forest, and there is still a fairly good chance that the government could shut down if it doesn't reach these goals by Jan. 19 and Feb. 2.
If you're running a business that depends on any type of revenues from the government, whether you're a deli or your shop owner near a government office building or facility, or you provide services to national parks or other governmental caused agencies, or if you subcontract or contract with the government and you receive money for projects, all of that stuff could come to a shutdown.
In addition, if you're relying on services from certain government agencies like the IRS or even the State Department for a passport, these things could stop if the government shuts down. Now, we are still a couple of weeks away from that happening, and although it is good news that forward progress has been made, if you think you're exposed to this problem, you need to prepare for it now and take action now before it becomes a bigger problem.
My name is Gene Marks and you have been listening to the Paychex Weekend Review podcast, the THRIVE podcast. If you'd like to suggest any guest or any advice or help with your business, please visit us at payx.me/thrive topics.
Hope this news was of interest to you and hopefully some of these insights will help you navigate your way around this news this week. We'll be back here next week with another Week in Review podcast to keep you current on the news that impacts your business. Take care and see you then.
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