Small Business Growth Soars to Record Levels: Economic Outlook & Key Trends

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Small business growth is improving. That's good news for the economy.

In August, the national unemployment rate dropped to its lowest level since the start of the pandemic. And that's a clear sign that the U.S. economy is slowly but surely inching its way toward a full recovery.

What's also encouraging is that small business job growth continued to accelerate in August. Last month, the Small Business Jobs Index by Paychex gained 0.45%. The index measures payroll data from about 350,000 companies. That gain may seem minor, but over the past 12 months, the index has grown 5.74%, which represents a record high year-over-year increase.

When we dig deeper into the data, we can see that the leisure and hospitality industry enjoyed a lot of employment gains. That's important, because that industry was among the most hard-hit during the pandemic. It's also important because it's an industry with a heavy concentration of female employees, and so far, the pandemic has disproportionately impacted women on the joblessness front. In fact, it's estimated that there are 1.8 million fewer women in the workforce now compared to pre-pandemic times.

Meanwhile, hourly earnings growth was up 8.36% in August in leisure and hospitality. Given the way inflation has been running rampant lately, that's important. And on a national scale, hourly earnings growth rose to 3.42% last month.

When will the U.S. economy get back to normal?

The number of new jobless claims dropped drastically for the week ended Sept. 4. That week, only 310,000 claims were filed, which represents a pandemic-era low.

Now to be clear, that doesn't mean the economy is back to normal. The national jobless rate is still higher than it was before the coronavirus crisis began, and while 310,000 new claims is an improvement over recent numbers, it's higher than the 215,000 new weekly claims that had been coming in before the outbreak erupted in the spring of 2020.

But the economy is, in fact, in a much better place than it was earlier this year, and if job growth continues at a solid pace, we may enjoy a full-fledged recovery sooner than expected. Of course, if that were to happen, it would probably eliminate the possibility of another stimulus check hitting Americans' bank accounts in the near term. The last round of direct payments was issued back in March and maxed out at $1,400 per recipient.

But while we may not see another stimulus check this year, parents of eligible children have more bonus cash to look forward to on a monthly basis. That's because half of the recently expanded Child Tax Credit is being paid in monthly installments that began going out in July and will continue through December. The credit previously maxed out at $2,000 per child, but this year, it could be worth up to $3,600 per child.

All told, the fact that small business growth is up is good news for the economy on a whole. And while it may reduce the likelihood of there being another stimulus check, it's still news worth celebrating.

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