Small business job creation improved at the end of 2019, according to new ADP data. Specifically, payrolls at companies with 1-49 workers rose by 69K in December, the largest increase since January and responsible for a third of all the private-sector jobs added to the economy last month. Admittedly seasonality likely contributed to the December gain as many small brick-and-mortars brought on additional workers to help with the holiday rush. However, there was also a 19K jump in hiring at small manufacturers in December, well above the pace of job creation seen at larger goods producers.
This makes sense since smaller firms have arguably struggled the most during the latest trade war and would therefore benefit sooner from a de-escalation, i.e. the Phase One deal reached in December. Other problems remain, though, such as competing for talent with larger firms. Many small businesses are responding by boosting worker compensation, and separate data from IHS Markit and Paychex showed that weekly earnings growth at these firms ended 2019 at an all-time high. Further, in the tight labor market skilled workers are increasingly demanding access to healthcare and retirement benefits on top of pay increases, and a growing number of small businesses are adapting to this environment by leveraging professional employer organizations (PEOs).
Sources: ADP, IHS Markit, Paychex