In February, the CBIZ Small Business Employment Index (SBEI) showed a seasonally adjusted gain of 0.17%, reflecting the unexpected strength of the U.S. economy in the face of high interest rates. With over 2,900 businesses employing 300 employees or fewer, the CBIZ SBEI monitors employment and payroll trends, offering a comprehensive understanding of small company trends.
According to Anna Rathbun, CFA, Chief Investment Officer, CBIZ Investment Advisory Services, LLC, “If this momentum continues, there could be a positive trajectory for small business hiring.” She added, “This reflects their adaptability and belief in the strength of the U.S. economy despite ongoing challenges like higher interest rates.”
Moreover, the employment data from the Bureau of Labor Statistics showed hiring growth that exceeded forecasts. The report revealed a total increase of 275,000 private-sector jobs. Although hiring increased overall, the country’s unemployment rate also rose to 3.9%. The study includes non-farm private employers of all sizes. According to the ADP employment report, hiring growth was seen in small, medium, and large-sized businesses. In February, there was a 140,000 increase in private sector employment overall. Among those jobs, small firms contributed 13,000 more on a monthly basis, seasonally adjusted. While the CBIZ SBEI includes data from organizations with 300 or fewer employees, the ADP report considers small businesses as those with 49 or fewer employees.
Here are the main takeaways from the report:
- In February, the SBEI showed that 20% of companies increased their workforce, 60% maintained their headcount, and 20% decreased their employment totals.
- Hiring gains were prominent in the Administrative and Support Services, Arts, Entertainment, Recreation, and Technology and Life Sciences sectors, while Accommodation and Food Services, Insurance, and Utilities saw declines.
- Geographically, the West, Southeast, and Central regions experienced employment growth, while the Northeast saw a decrease.
- Looking forward, if economic conditions stay favorable, there might be more robust and sustained employment growth in the small business sector despite high-interest rate challenges. This follows the Q1 2024 CBIZ Main Street Index, which surveyed over 1,300 U.S. businesses and showed a decrease in concern about interest rates affecting profits, signaling a positive shift in economic sentiment.
