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The first decline in six months points to challenges ahead for small business, says Employment Hero.
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SME job growth fall ‘a sign of recession-to-come’
25 January 2024
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9 minute read
Job growth at small businesses has slowed for the first time in six months – a sign the economy risks entering a recession, according to the latest data from HR platform Employment Hero.
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Its SME Index, created from the average number of employees per business compared to January 2019, fell 0.5 points month-on-month to 129.7 while the median hours also declined -1.3 per cent.
The results varied across regions and industries, with robust annual growth in South Australia and Western Australia but declines elsewhere.
Employment Hero CEO Ben Thompson said the index results reflected the nation’s shifting economic landscape.
“While we've seen some positive signs this month, specifically in wages, the slight downturn in the index and the nuanced variations in employment growth across different states, territories, and industries point to a challenging period ahead,” he said.
“This overall downward trajectory indicates a small recession will likely occur later this year as SMEs pump the brakes on hiring and growth plans.
“As Australia faces these complex challenges, this data underscores the need for strategic planning and support for the SME sector, which is instrumental in driving the nation's economic health.”
Wages increased slightly following a dip in November with the science, information, and technology sector leading the way with an increase of 3.8 per cent in December and the highest hourly rate of $59.68.
Retail, hospitality and tourism experienced the smallest monthly increase of 0.4 per cent. The median hourly rate stood at $38.14 in December after a 7.8 per cent increase year on year.
Employees aged 65-plus gained the most over the 12 months (+8.4 per cent) while 18-24 year-olds averaged an increase of 6.4 per cent.
“Last month, wages declined for the first time in six months, prompting us to call for the RBA to halt further cash rate increases for at least the near term,” Mr Thompson said.
“In contrast, in December, we saw a slight uptick of 1 per cent in the median hourly rate, which suggests the RBA must now tread carefully on interest rate cuts in the immediate future.
“This inflation game is undoubtedly a delicate balancing act, which is why the real-time granularity of our data is so critical to ongoing discussions concerning Australia’s employment landscape.”
Employment Hero's SME Index uses data from over 150,000 SMEs and 1.5 million employees.
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