Small Business Wages Have Grown Under 3% for 26 Months — And Owners Are Adding Hours, Not Hires

Small businesses with fewer than 50 employees held their job growth steady in October, but the Paychex Small Business Employment Watch released November 3 shows owners are meeting demand by stretching the teams they have. Weekly hours worked growth has been positive for eight consecutive months, while hourly earnings growth has stayed below 3% for 26 straight months.

The Headline Numbers

The national small business jobs index rose 0.06 points to 99.21 in October. For context, it stood at 99.15 last month, 99.23 last quarter and 99.27 a year ago. In other words, hiring is essentially flat over twelve months.

Paychex CEO John Gibson said job growth among small businesses has been "largely unchanged over the last year" and that employers are meeting demand with their current teams. He also noted "slightly stronger job growth among businesses with more than 50 employees" and concluded that the labor market "remains fundamentally solid."

Wages: Still Under 3%

Hourly earnings growth was 2.88% in October, and weekly earnings growth rose to 3.04%. The gap between the two comes from hours: weekly hours worked growth was 0.11%. The three-month annualized earnings growth rate was 2.89%, which the release says slipped below 3% for the first time since February 2026, when it was 2.42%.

Construction and manufacturing led growth in hourly earnings, weekly earnings and weekly hours worked, so owners in those trades are likely feeling the most pressure to keep pay competitive.

Where Hiring Is Strongest

By region

The Midwest led all regions at 99.51, a top position it has held in 28 of the past 29 months. More than half of the states analyzed increased their pace of job growth in October.

By state and metro

Arizona led the states at 100.85 for the third consecutive month. Phoenix led the largest metros at 101.57, driven by strong manufacturing gains.

By sector

Education and health services led sectors at 99.86 and has been in the top two every month since February 2023. Construction and manufacturing led on pay and hours.

Why More Hours Instead of More Hires?

Eight straight months of rising hours with flat headcount suggests owners are cautious. Adding a person brings payroll tax, benefits, training and compliance obligations. Giving existing employees more hours is faster and easier to reverse. The tradeoff is overtime exposure and burnout, which can show up later as turnover.

What Owners Can Do Now

• Track hours by person. If your team's hours are creeping up, check who is crossing 40 hours a week and what overtime is costing you before it surprises you in a paycheck.
• Benchmark your pay. With average hourly growth under 3%, a raise that beats that figure can help retention. Compare against your local market, not only the national number.
• Decide when hours become a hire. If one employee is routinely covering extra shifts, the cost of a part-time hire may be lower than sustained overtime.
• Classify workers correctly. If you use freelancers to cover peaks, review the rules in our guide on independent contractor vs. employee.
• Model the real cost. Put wages, taxes and overtime into your profit and loss statement so you can see whether added hours still make sense.

The Bottom Line

The labor market for small employers is steady but not expanding. Pay is rising slowly, hours are rising a little, and headcount is flat. If you run a team of fewer than 50, expect that pattern to hold through the winter and plan staffing around the hours you already have.

Source: Paychex Small Business Employment Watch, October 2026, published November 3, 2026.

Photo by Eric Prouzet on Unsplash