Small Business Job Growth Ticks Up as Wage Growth Hits Six-Year Low

Hourly earnings growth at U.S. small businesses slowed to an annualized 2.41% in September, its lowest one-month pace since October 2020 (2.40%), according to the Paychex Small Business Employment Watch released September 29. The figure comes from a monthly dataset covering firms with fewer than 50 employees, tracked since 2014.

The headline jobs index edged up 0.02 percentage points to 99.15, broadly in line with the 2026 year-to-date average of 99.19. Year-over-year hourly earnings growth registered 2.78%, extending a moderating trend that has now lasted more than two years.

What the numbers mean for workers

For job seekers, the picture is one of a market that has stopped tightening but has not cracked. Firms are holding staffing levels steady and squeezing more output from the people they already employ: weekly hours worked grew 0.21% in September, the seventh consecutive month of gains, and weekly earnings growth rose to 3.07%, the ninth straight monthly increase.

That combination — flat headcount, rising hours, subdued hourly wage growth — signals that small businesses are meeting demand through existing workforce capacity rather than new hiring. Candidates negotiating pay at firms under 50 employees face less upward pressure on base wages than at any point in nearly six years, while those already employed are seeing modest gains in total weekly pay through hours.

"The small business labor market continues to demonstrate remarkable stability," said John Gibson, Paychex president and CEO. "Our data shows businesses are largely maintaining staffing levels. The pace of employment growth across our overall client base improved slightly in September, with stronger growth among businesses with more than 50 employees."

Gibson noted that sustained increases in weekly earnings and hours worked show businesses meeting operational needs without increasing hiring, and that with hourly earnings growth below three percent for more than two years, "labor cost pressures have become more manageable. These trends point to a labor market that remains fundamentally solid."

Regional and sector detail

The Midwest led regional small business employment growth with a jobs index of 99.62. Arizona topped the state rankings at 100.59 and has held above the 100 mark — indicating net job gains — for five consecutive months. Phoenix led all U.S. metros at 101.31.

Education and Health Services posted the strongest sector index at 99.79 and has ranked among the top two sectors for small business job growth every month since February 2023 — a sustained run that makes it the most reliable destination for small-employer hiring in the dataset. Note that the industry classifications follow Bureau of Labor Statistics definitions.

Context on the source

The Paychex index draws on the company's client base of roughly 840,000 businesses, which pay about 1 in 11 U.S. private sector workers, making it one of the largest proprietary HR datasets in the industry. A reading of 100 on the jobs index represents neutral employment conditions; readings below it indicate net contraction, above it net growth.

The September report's single-month annualized wage figure can be volatile, and Paychex publishes historical data and methodology for both the jobs index and wage components on its Employment Watch site for readers who want to check revisions.

With employment growth improving slightly among larger firms in Paychex's broader client base and small business staffing holding near its 2026 average, the October release will show whether hourly wage growth stabilizes near its six-year low or continues to drift downward.