As 2023 comes to a close, the job market has remained more resilient than many predicted it would at the start of the year – and SMBs are a big reason why. Amid still-high prices and a large degree of economic uncertainty, small and midsized businesses are driving the economy to a historic degree: by September, the smallest firms accounted for a larger share of job openings than larger companies for the first time on record. Using data from Gusto’s 300,000+ SMBs, this post examines the places driving that growth – in employment and wages – and offers a preview into a key end-of-year trend in worker bonuses.

Small and Mid-Sized Cities Power Job Growth

In 2022, Gusto data showed that economic growth was shifting from large, coastal centers to smaller metropolitan areas, and that trend continued in 2023. Among the top 50 metropolitan areas, Virginia Beach saw the fastest growth in jobs, at 12.5% from January to November 2023, followed by Richmond (+11.2%), and Buffalo (10.7%). Indeed, Philadelphia is the only city among the ten largest in population that is also among the ten fastest-growing cities. This growth comes as remote work opportunities continue to spread economic activity across the country and as high costs of living push households out of the largest metropolitan areas.

Metro AreaPercent Change in Employment,
January-Nov 2023
Virginia Beach12.5%
Richmond11.2%
Buffalo10.7%
Indianapolis10.4%
Providence10.1%
San Antonio9.4%
Columbus9.2%
Philadelphia8.9%
Pittsburgh8.7%
Minneapolis-St. Paul8.6%

Southern Cities See Fastest Pay Growth

Second, while pay growth across the economy has slowed in 2023, workers in many cities across the country are still notching solid gains – and those gains are particularly concentrated in the Southern US. Indeed, among the ten cities with the fastest pay growth, 7 are in the South, with Richmond, VA at the top with a 9.4% increase in wages from January to November 2023. In part, these fast wage gains are a function of the lower-than-average starting wages in many southern cities compared to other regions – 7 out of 10 of these cities are still in the bottom half of hourly wages in November. But the South has also seen an influx of population over the past several years, generating a cycle of economic growth that has led to faster wage gains.

Metro AreaPercent Change in Wages,
January-Nov 2023
Richmond9.4%
Buffalo8.1%
New Orleans7.2%
Birmingham6.8%
Hartford6.7%
Nashville6.0%
Memphis5.4%
Louisville4.9%
Jacksonville4.9%
St. Louis4.4%

Bonuses Are Shaping Up to Be Smaller in 2023

Finally, as job growth and wage gains slowed from their post-pandemic peaks in 2023, end-of-year bonuses are on the decline as well. In November, bonuses paid by firms on Gusto’s platform averaged $1,220, a 27% decline from the $1,690 average in November last year (and well below the $2,028 average in November 2019). 

The decline in bonus sizes has been widespread across sectors – with 18 of 21 sectors seeing a decrease compared to last year. Workers in Communications (+6%), Insurance (+5%), and Automotive (+3%) saw slight increases in bonuses – sectors that have recently seen faster-than-average job growth. Firms in Finance, feeling the effects of the highest interest rates in over twenty years, offered bonuses 58% smaller on average than last year. Retail workers saw a 57% drop in bonus size, as businesses dealt with unprecedented uncertainty about just how much consumers will spend over the all-important holiday shopping season.

Average Bonus Sizes by Sector, November 2023 and 2022





Industry


Average Bonus in November 2023Average  Bonus in November 2022Percent Change in Bonus Size
Communications$2,905.31$2,728.626%
Insurance$1,175.23$1,114.025%
Automotive$838.85$817.373%
Real Estate$1,258.78$1,576.48-3%
Construction$1,534.83$1,355.96-7%
Warehousing$563.46$610.99-8%
Consulting$2,895.38$3,209.46-10%
Technology$3,390.19$3,840.52-12%
Healthcare & Social Assistance$863.64$982.71-12%
Wholesale$1,915.86$2,249.52-15%
Food & Beverage$458.17$542.44-16%
Accommodations$468.38$582.21-20%
Legal$2,777.23$3,484.23-20%
Facilities$478.33$604.20-21%
Accounting$2,178.34$2,795.64-22%
Salon & Spa$371.01$520.24-29%
Education$737.64$1,047.96-30%
Non-Profits & Associations$1,203.90$1,919.85-37%
Transportation$738.82$1,230.82-40%
Retail$786.64$1,831.97-57%
Finance$4,255.28$10,123.36-58%
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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