Modest small-business job growth recorded in May after a two-month decline

age, JobKeeper, hiring, skill shortages

Small-business platform Xero’s latest report on the health of Australia’s small-business economy saw the Small Business Index fell only one point in May 2022 to 124 points.

While small-business jobs increased 0.3 per cent year-on-year (y/y) and sales growth rose to double digits (10.8 per cent y/y) the report says that these results were offset by slower wage growth and longer payment times.

The report does highlight a remarkable period for small businesses for having recorded four months of above-average performance.

“It’s promising to see an increase in jobs. While the data indicates only small growth, we know that any and all support for small businesses is important,” Joseph Lyons, Managing Director Australia and Asia at Xero, said. “It has been an ongoing challenge for many to find talent, hampering their ability to fully recover – we all know a restaurant or cafe that’s struggled to open its doors due to lack of staff. We hope to see this growing jobs trend continue as Australia gradually welcomes new talent from overseas and expands the labour pool.”

Small business jobs grew 0.3 per cent y/y, a small but positive result after two months of decline. The largest job growth was recorded in the administrative and support service industry (4.5 per cent y/y), while education and training continued declining for the ninth consecutive month at 5.0 per cent y/y.

“While jobs remain soft, this is a welcome break following a trend of slower and falling jobs growth over the past seven months,” Louise Southall, Economist at Xero, said. “Ongoing high levels of job advertisements indicate supply remains the issue, with demand for more workers clearly there as small businesses continue to compete for staff.”

Sales rebounded in May increasing to 10.8 per cent y/y, from 8.3 per cent y/y in April, due to a combination of rising prices and higher sales. Along with the largest jobs growth, the administrative and support service industry also recorded the highest sales result at 20.4 per cent y/y.

However, with the cost of living pressures rising, discretionary spending-based industries including hospitality (2.8 per cent y/y) and information media and telecommunications (6.4 per cent y/y) saw softer results.

“With inflation continuing to rise, this result was expected as Australians reduce discretionary spending and focus on necessary purchases,” Southall said. “Consumers are becoming more pragmatic due to the combination of increasing prices and only modest wage growth. This can be seen in the weaker sales results for the hospitality, information media and telecommunication industries.”

Wages slowed in May to 3.7 per cent y/y from 4.3 per cent y/y in April, impacting all industries and regions. Transport recorded the slowest growth at only 2.9 per cent y/y, followed by arts and recreation at 3.0 per cent y/y. This was contrary to expectations in which tight labour market was supposed to push wages higher.

“The surprise decline in wages in May, coupled with the soft jobs results in recent months, suggests small businesses might be struggling to compete with larger businesses to find the staff they need to keep growing,” Southall concluded.