Dive Brief:

• Hourly earnings growth rose 2.38%, or $0.63, despite a slowdown in job growth last month, the Paychex | IHS Markit Small Business Employment Watch showed. Hiring challenges remain, especially for small businesses, as the tight labor market continues to contract. The Small Business Jobs Index, which measures job growth according to payroll data, fell by 0.11% from October to 99.01 in November, for a sixth-month consecutive decline.
• When broken down by geography and industry, the November report showed that the South and West had the highest wage and job growth, respectively. Pennsylvania and Massachusetts showed the weakest job growth for small businesses, while Arizona had the highest wage growth. Dallas had the top job growth among cities and Riverside, CA, held the top spot in wage growth. The construction industry set a new record high in hourly earnings growth at 3.31%.
• "With the Jobs Index at its lowest level since 2010, small businesses continue to have difficulty finding workers in the competitive hiring environment of 2018," James Diffley, chief regional economist at IHS Markit, said in a statement. Paychex president and CEO Martin Mucci added that job growth among small businesses remains strained, even as the seasonal rush takes place.

Dive Insight:

The uptick in wage growth is, in part, employers' response to competitive hiring in a tight labor market and record-low unemployment. Employers in construction, leisure and hospitality likely opted to raise wages to compete for and retain workers.

IHS Markit and Paychex data from August showed that while job and wage growth among small businesses both fell, the weekly hours employees worked increased. This indicated that employees were working longer for less pay. Last month's increase in wage growth may be no more than what workers would expect.

If large companies are still struggling with hiring in an employee-driven market, small businesses, with fewer resources to compete, could be challenged even further in the upcoming months. Although higher pay is the top attraction for job seekers, small businesses might find that offering in-demand benefits and focusing on improving the employee experience are acceptable trade-offs to higher pay.