Small Business Job Growth Flat in October as Hours, Not Hires, Drive Output

Hourly earnings growth at U.S. small businesses stayed below three percent in October for the 26th consecutive month, while the Paychex Small Business Employment Watch national jobs index inched up just 0.06 percentage points to 99.21.

The reading, published November 3, 2026, covers firms with fewer than 50 employees. Job growth has been essentially flat against the prior month (99.15), the quarter (99.23) and the year (99.27). The index barely moves. That stability is the story.

What are employers doing instead of hiring?

They are extending hours. Weekly hours worked growth came in positive at 0.11 percent in October, the eighth consecutive month of gains. Employers are squeezing more output from the people they already have rather than adding headcount.

John Gibson, Paychex president and CEO, said: "Job growth among small businesses with fewer than 50 employees has been largely unchanged over the last year, as employers continue to find ways to meet demand with the teams they have in place."

He added: "Weekly hours worked growth has remained positive for eight consecutive months, a trend that signals businesses are generating greater output from their existing workforce while remaining disciplined about adding headcount."

Where is the growth concentrated?

The regional and sector breakdown shows a familiar pattern:

• The Midwest led all regions at 99.51, a 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.
• Arizona topped the states at 100.85 for the third consecutive month.
• Phoenix led the largest metros at 101.57, driven by strong manufacturing gains.
• Education and Health Services ranked first among sectors at 99.86 and has placed in the top two sectors every month since February 2023.

Construction and Manufacturing led growth across all three wage measures in October: hourly earnings, weekly earnings and weekly hours worked.

What do the wage numbers show?

Hourly earnings growth was 2.88 percent in October. Weekly earnings growth rose to 3.04 percent. But the three-month annualized figure slipped to 2.89 percent, falling below three percent for the first time since February 2026, when it registered 2.42 percent.

The gap between weekly and hourly earnings growth comes from the extra hours. Firms pay more per week because people work longer, not because hourly rates are surging.

Gibson framed the broader picture: "Despite an evolving macroeconomic environment and ongoing challenges finding qualified workers, our customers continue to demonstrate resilience, with slightly stronger job growth among businesses with more than 50 employees. Overall, the labor market remains fundamentally solid."

How reliable is the gauge?

Paychex has run the Employment Watch since 2014. It draws on the company's proprietary HR dataset, built on more than 50 years of workforce experience. Paychex serves roughly 840,000 customers and pays one in 11 U.S. private sector workers, giving the index a wide base of payroll records. The data appears on Bloomberg Terminals, and the methodology is published alongside interactive charts and historical figures for both the jobs index and the wage components. Industry classifications follow the Bureau of Labor Statistics definitions.

The takeaway for the months ahead: if hours keep rising while headcount stays flat and hourly earnings growth holds under three percent, small businesses are signaling caution on hiring without cutting capacity — a stance that will be tested as demand and worker availability shift.