Small business continuing to employ workers

Arts and recreation had the biggest increase in hiring (+15.7 per cent y/y) with hospitality coming in second (+11.4 per cent y/y). The October results revealed agriculture (+0.3 per cent y/y) and construction (+1.7 per cent y/y) were the softest sectors.

More jobs were created in the sector in the ACT (+10.9 per cent y/y) while the rest of the regions recorded single-digit growth.

“While the October results reveal a slowdown in jobs growth, these numbers are still well above average. On top of this, itʼs promising to see arts & recreation and hospitality industries continue to rebound, leading the charge in jobs for the fourth consecutive month,” said Louise Southall, economist, Xero.

Overall the index showed that small-business performance fell slightly in October but remains above average despite the economic headwinds many are facing with rising energy prices, inflation, and cost-of-living pressures.

The index fell 13 in October to 115 points driven by all four sub-metrics. Sales growth dropped to single digits (+9.1 per cent y/y), which is the lowest reading since February 2021.

On top of that, jobs growth slowed to 5.5 per cent y/y and wages grew 4.2 per cent y/y — above the long-term average but 0.6 percentage points less than September.

Meanwhile, the length of time small businesses waited to be paid rose from 0.1 days to 23.5 days in October.

Will Buckley, country manager, Xero Australia, said while the October data is softer than previous months, the index remains above the long-term averages.

“Thereʼs no doubt the rising cost of living — driven by inflationary pressures — is challenging Australians across the country with many consumers being forced to re-examine purchases and reduce discretionary spending,” he said.

“This means customers are left with less to spend at local small businesses. Despite this, it is promising to see that small businesses still have the confidence to bring on new employees.”

Hospitality had the highest wage growth (+5.2 per cent y/y) followed by construction (+4.9 per cent y/y). Healthcare (+3.4 per cent y/y) and rental, hiring, and real estate (+3.9 per cent y/y) saw the slowest growth y/y.

However, the index revealed that jobs growth slowed to 5.5 per cent y/y in October, after a double-digit growth of 10.2 per cent y/y in September. This, however, is still above the long-term average (+3.0 per cent y/y) and comes after five consecutive months of accelerating jobs growth.

Nominal sales grew 9.1 per cent y/y in October, slower than September’s 13.5 per cent y/y. When using the September quarter CPI (7.3 per cent y/y) as a proxy for price rises, sales volumes rose by 1.8 per cent y/y.

Similarly, to the jobs data, the two strongest industries were arts & recreation (+27.6 per cent y/y) and hospitality (+26.4 per cent y/y). Rental, hiring, and real estate (+2.1 per cent y/y) recorded the smallest rise in sales.

“Small business retailers are heading into what is traditionally a busy trading period. As cost-of-living pressures continue to restrict consumers, it will be incredibly important for Australians to shop small this festive season and ensure smaller retailers are better positioned as they head into 2023,” said Mr Buckley.