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Labor costs remain high for small businesses, but a report shows wage growth is slowing for some

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Labor costs remain high for small businesses, but a report shows wage growth is slowing for some
News

News

Labor costs remain high for small businesses, but a report shows wage growth is slowing for some

2024-09-11 00:10 Last Updated At:00:21

NEW YORK (AP) — Employee wages are one of the biggest costs for small businesses.

A new survey found some owners may be seeing a bit of relief when it comes to wages. But while some say wage growth has stabilized or slowed, others note they haven't seen any moderation in their industries yet.

The Paychex Small Business Employment Watch found hourly earnings growth for workers at firms with 50 employees or less dropped to 2.89% in August. It's the first time growth has dropped below 3% since January 2021.

“After holding steady for several months, hourly earnings growth continued to decelerate in August,” said John Gibson, Paychex president and CEO. “Falling below three percent for the first time in three years is another notable signal that the labor market is moving closer to its pre-pandemic level.”

John Wilson, the owner of Wilson Plumbing and Heating in Akron, Ohio, with more than 150 employees, said labor costs are one of his biggest expenses, making up about 50%-70% of his budget. He said he's seen wages going up steadily over the years but he's seeing signs of stabilization — some recent job candidates have been more open to salary negotiations, for example.

“If labor costs aren’t managed well, it could disrupt the entire business," he said.

Albert Brenner owns a manufacturing business, Altraco, in Thousand Oaks, California. He said he hasn’t seen signs of a significant deceleration in wages yet. His top concerns right now are inflation, supply chain disruptions and the overall economy, but labor costs are one of his largest expenses.

“We are constantly balancing the need to offer competitive wages to retain skilled workers with the need to manage our overall expenses,” he said.

According to the Paychex data, one-month annualized hourly earnings growth dropped to 1.91%. The national jobs index increased 0.02 percentage points to 99.89 in August, indicating nominal year-over-year job losses. The national small business jobs index has averaged 100.37 through eight months of 2024, representing modest employment growth.

The jobs index is scaled to 100. Index values above 100 represent new jobs being added, while values below 100 represent jobs being lost.

Gibson said that the data supports broader trends of a cooling labor market and expectations that the Federal Reserve could begin lowering interest rates soon.

Josh Miller, CEO of Clean Carpets, a professional carpet cleaning service based in Austin, Texas, with six employees, said labor costs account for almost 45% of his total operational costs.

He said he hasn't felt any deceleration in wage growth, mainly since, as a service-based business, finding skilled workers who can also run the company's specialized equipment is always a challenge.

”The labor market in Austin is extremely competitive for skilled labor, so we continue to pay either at or above market rates to retain our talent," he said. “Inflation may be cooling, but we continue to experience upward pressure on wages to attract and retain reliable staff.”

The Paychex Small Business Employment Watch draws from the payroll data of about 350,000 Paychex clients.

FILE - Early-morning light shines on shops on Main Street, Saturday, June 11, 2022, in Bar Harbor, Maine. (AP Photo/Robert F. Bukaty, File)

FILE - Early-morning light shines on shops on Main Street, Saturday, June 11, 2022, in Bar Harbor, Maine. (AP Photo/Robert F. Bukaty, File)

FILE - A hiring sign is displayed at a restaurant in Mount Prospect, Ill., Feb. 1, 2024. (AP Photo/Nam Y. Huh, File)

FILE - A hiring sign is displayed at a restaurant in Mount Prospect, Ill., Feb. 1, 2024. (AP Photo/Nam Y. Huh, File)

WASHINGTON (AP) — President Donald Trump signed an executive order Monday directing the United States to again withdraw from the landmark Paris climate agreement, dealing a blow to worldwide efforts to combat global warming and once again distancing the U.S. from its closest allies.

Trump's action, hours after he was sworn in to a second term, echoed his directive in 2017, when he announced that the U.S. would abandon the global Paris accord. The pact is aimed at limiting long-term global warming to 2.7 degrees Fahrenheit (1.5 degrees Celsius) above pre-industrial levels or, failing that, keeping temperatures at least well below 3.6 degrees Fahrenheit (2 degrees Celsius) above pre-industrial levels.

Trump also signed a letter to the United Nations indicating his intention to withdraw from the 2015 agreement, which allows nations to provide targets to cut their own emissions of greenhouse gases from the burning of coal, oil and natural gas. Those targets are supposed to become more stringent over time, with countries facing a February 2025 deadline for new individual plans. The outgoing Biden administration last month offered a plan to cut U.S. greenhouse gas emissions by more than 60% by 2035.

Trump's order says the Paris accord is among a number of international agreements that don't reflect U.S. values and “steer American taxpayer dollars to countries that do not require, or merit, financial assistance in the interests of the American people."

Instead of joining a global agreement, “the United States’ successful track record of advancing both economic and environmental objectives should be a model for other countries,'' Trump said.

Laurence Tubiana, CEO of the European Climate Foundation and a key architect of the Paris accord, called the planned U.S. withdrawal unfortunate but said action to slow climate change “is stronger than any single country’s politics and policies."

The global context for Trump's action is “very different to 2017,'' Tubiana said Monday, adding that “there is unstoppable economic momentum behind the global transition, which the U.S has gained from and led but now risks forfeiting."

The International Energy Agency expects the global market for key clean energy technologies to triple to more than $2 trillion by 2035, she said.

“The impacts of the climate crisis are also worsening. The terrible wildfires in Los Angeles are the latest reminder that Americans, like everyone else, are affected by worsening climate change,” Tubiana said.

Gina McCarthy, who served as White House climate adviser under President Joe Biden, a Democrat, said that if Trump, a Republican, “truly wants America to lead the global economy, become energy independent and create good-paying American jobs," then he must “stay focused on growing our clean energy industry. Clean technologies are driving down energy costs for people all across our country."

The world is now long-term 2.3 degrees Fahrenheit (1.3 degrees Celsius) above mid-1800s temperatures. Most but not all climate monitoring agencies said global temperatures last year passed the warming mark of 2.7 degrees Fahrenheit, and all said it was the warmest year on record.

The withdrawal process from the Paris accord takes one year. Trump’s previous withdrawal took effect the day after the 2020 presidential election, which he lost to Biden.

While the first Trump-led withdrawal from the landmark U.N. agreement — adopted by 196 nations — shocked and angered nations across the globe, “not a single country followed the U.S. out the door,” said Alden Meyer, a longtime climate negotiations analyst with the European think tank E3G.

Instead, other nations renewed their commitment to slowing climate change, along with investors, businesses, governors, mayors and others in the U.S., Meyer and other experts said.

Still, they lamented the loss of U.S. leadership in global efforts to slow climate change, even as the world is on track to set yet another record hot year and has been lurching from drought to hurricane to flood to wildfire.

“Clearly America is not going to play the commanding role in helping solve the climate crisis, the greatest dilemma humans have ever encountered,″ said climate activist and writer Bill McKibben. “For the next few years the best we can hope is that Washington won’t manage to wreck the efforts of others.”

About half of Americans “somewhat” or “strongly” oppose U.S. action to withdraw from the climate accord, and even Republicans aren’t overwhelmingly in favor, according according to a poll from The Associated Press-NORC Center for Public Affairs Research. Only about 2 in 10 U.S. adults “somewhat” or “strongly” in favor of withdrawing from the Paris agreement, while about one-quarter are neutral.

Much of the opposition to U.S. withdrawal comes from Democrats, but Republicans display some ambivalence as well. Slightly less than half of Republicans are in favor of withdrawing from the climate accord, while about 2 in 10 are opposed.

China several years ago passed the United States as the world's largest annual carbon dioxide emitting nation. The U.S. — the second biggest annual carbon polluting country — put 4.9 billion metric tons of carbon dioxide in the air in 2023, down 11% from a decade earlier, according to the scientists who track emissions for the Global Carbon Project.

But carbon dioxide lasts in the atmosphere for centuries, so the United States has put more of the heat-trapping gas that is now in the air than any other nation. The U.S. is responsible for nearly 22% of the carbon dioxide put in the atmosphere since 1950, according to Global Carbon Project.

While global efforts to fight climate change continued during Trump's first term, many experts worry that a second Trump term will be more damaging, with the United States withdrawing even further from climate efforts in a way that could cripple future presidents’ efforts. With Trump, who has dismissed climate change, in charge of the world’s leading economy, those experts fear other countries, especially China, could use it as an excuse to ease off their own efforts to curb carbon emissions.

Simon Stiell, the U.N. climate change executive secretary, held out hope that the U.S. would continue to embrace the global clean energy boom.

“Ignoring it only sends all that vast wealth to competitor economies, while climate disasters like droughts, wildfires and superstorms keep getting worse," Stiell said. “The door remains open to the Paris Agreement, and we welcome constructive engagement from any and all countries.”

Associated Press writer Linley Sanders contributed to this report.

The Associated Press’ climate and environmental coverage receives financial support from multiple private foundations. The AP is solely responsible for all content. Find the AP’s standards for working with philanthropies, a list of supporters and funded coverage areas at AP.org.

AES Indiana Petersburg Generating Station, a coal-fired power plant, operates in Petersburg, Ind., on Wednesday, Oct. 25, 2023. (AP Photo/Joshua A. Bickel)

AES Indiana Petersburg Generating Station, a coal-fired power plant, operates in Petersburg, Ind., on Wednesday, Oct. 25, 2023. (AP Photo/Joshua A. Bickel)

FILE - Wind turbines stretch across the horizon at dusk at the Spearville Wind Farm, Sept. 29, 2024, near Spearville, Kan. (AP Photo/Charlie Riedel, File)

FILE - Wind turbines stretch across the horizon at dusk at the Spearville Wind Farm, Sept. 29, 2024, near Spearville, Kan. (AP Photo/Charlie Riedel, File)

President Donald Trump gestures during the 60th Presidential Inauguration in the Rotunda of the U.S. Capitol in Washington, Monday, Jan. 20, 2025. (AP Photo/Julia Demaree Nikhinson, Pool)

President Donald Trump gestures during the 60th Presidential Inauguration in the Rotunda of the U.S. Capitol in Washington, Monday, Jan. 20, 2025. (AP Photo/Julia Demaree Nikhinson, Pool)

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