Small Businesses Pulled Back on Hiring in June, CBIZ Index Shows

For the first time since January, small business hiring declined in June as many small-to-midsized businesses are struggling to find skilled labor to meet the demand for their goods and services, according to top 15 accounting firm CBIZ.

The CBIZ Small Business Employment Index (SBEI), which tracks hiring trends among thousands of companies with 300 or fewer employees across the U.S., reported a seasonally adjusted decrease of 0.08% in June, a month that historically experiences job gains with the summer season beginning. June’s results erased four straight months of small business hiring growth.

The Bureau of Labor Statistics’ June employment report indicated hiring growth that met expectations, with an overall increase of 206,000 private-sector jobs. However, the national unemployment rate rose slightly to 4.1%. The report is inclusive of all non-farm private employers across businesses of all sizes.

Similarly, the ADP employment report indicated hiring growth among small-, medium-, and large-sized companies. Its June reading showed an overall increase of 150,000 private-sector jobs for the month. Small businesses accounted for an increase of 5,000 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.

“There is a lot of economic data pointing toward a cooling employment market,” Anna Rathbun, CFA, chief investment officer at CBIZ Investment Advisory Services, said in a statement. “The June labor market update from the Bureau of Labor Statistics continued the trend of weakness under strong headline non-farm payroll gains and downward revisions in job gains from previous months. If this trend continues it will likely help the Federal Reserve’s decision to reduce interest rates; however, for small businesses and job seekers, it lends to a period of uncertainty.”

In June, 19% of companies in the index increased staffing, 60% made no change to their headcounts, and 21% reduced employment totals, according to CBIZ. The administrative and support services; retail; and technology and life sciences industries saw increases in hiring, while the accommodation and food services; arts, entertainment, and recreation; and not-for-profit sectors saw declines in hiring.

On a regional level, hiring trends for small businesses were mixed. The West (-1.89%) and Southeast (-1.27%) regions reported hiring decreases, while the Central (0.67%) and Northeast (0.25%) regions reported hiring increases. June usually signals job growth with the onset of summer, but this year presented unexpected challenges, CBIZ said. The food services sector, which typically thrives during this period, faced hiring losses. The arts, entertainment, and recreation industry also encountered surprising difficulties last month.

“June is normally a positive month of job gains as the summer season is in full swing, but there were some challenges that were uncharacteristic of the season,” Rathbun said. “Typically, we expect summers to see healthy job creation in food services, but this was the area that was hardest hit. It was also surprising to see challenges in the arts, entertainment, and recreation industry for the month of June. The softness in the service industry was corroborated in the BLS’s jobs report for June, which saw accommodation and food services losing 2,400 jobs.”