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July 2023 Gusto SMB Insights: A ‘Soft Landing’ For SMBs in Sight

Luke Pardue Economist, Gusto 

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The gradual slowdown in job growth from the rapid post-pandemic pace continued in July, according to platform data from 300,000+ small and midsize businesses. Employment grew at about half the pace of last July, without any increase in layoffs, and companies are paying 5.1% less for new hires – all a sign that the job market continues to cool but not contract.

  • In July 2023, pay among newly hired workers was 5.1% lower than pay for those hired this time last year, although industries affected by staffing shortages are still raising starting pay, led by Tourism (+7.0%), Warehousing (+6.9%), and Construction (+6.4%).
  • Overall SMB employment grew by 0.4% in July, a fall of almost half the growth rate seen last July, a sign that the job market cooldown continues. The fastest-growing industries in July were Tourism (+11.8%), Accommodations (+10.8%), and Facilities (+10.4%).

Gusto’s New Hires Pay Index

Gusto’s New Hires Pay Index tracks business competition for workers in real time. It’s the change in wages paid to employees hired this month compared to a year ago. This index rose slightly to -5.1% in July 2023, meaning businesses paid new workers 5.1% less than new hires last year, a sign of easing competition among employers looking for workers.

Hiring Trends

Across sectors, SMB employment increased 0.4% in July 2023, compared to a 0.7% increase in July last year. Driving this change was a fall in the hiring rate, which dropped from 5.8% to 5.2% over the past year. The termination rate, however, has fallen as well, however, from 5.1% to 4.7%, mainly as workers voluntarily quit jobs at lower rates. The layoff rate this month has not changed compared to July 2022.

The falling hiring rate indicates that businesses are looking to expand at slower rates this July, but the decrease in terminations means that companies are still eager to retain the staff they have worked hard to attract over the past several years.

About the data

Gusto pay and hiring trends data is derived using Gusto’s real-time payroll data from over 300,000 small and medium-sized businesses across industries and across the country. New Hires Pay Index calculates the percent change in average annualized pay between workers hired in a given month and those hired one year earlier.

Interested in learning more about these trends? Contact us at [email protected]

Luke Pardue is an Economist at Gusto, researching how public policies help small businesses and their workers thrive. He received his Ph.D. from the University of Maryland, where he studied the effects of government programs on disadvantaged populations' housing and labor market outcomes. Luke currently lives in Washington, D.C.
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