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Small business hiring has dipped slightly in New York, but business owners are increasing salaries to retain quality employees, a new study shows.
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On Monday, SurePayroll, an Illinois-based payroll services firm, released its May 2006 scorecard on the state of the nation’s small businesses. The scorecard is based on the data of 16,000 employee and independent contractor paychecks.

High oil and gas prices, war and uncertainty in the Middle East, rising health care costs, rising interest rates, a weakening housing market and dwindling consumer confidence all figure into the current hiring equation, according to the study.

“It’s a tough economic environment right now that makes it difficult to add new employees,” said SurePayroll spokesman Ken Gaebler.

In May, the average small business size in New York was 4.48 employees, down slightly from December 2005, when the average small business carried 4.52 employees, Gaebler said. During that same time period, the average salary jumped from $30,906 to $34,906, according to SurePayroll.

On Long Island, which sustains a primarily small business economy, the most current U.S. Labor Department data shows employment growth increased from 1,163,946 in the first quarter of 2004 to 1,173,030 a year later, according to regional labor market analyst Gary Huth.

“The pattern we’ve been in is a healthy if not spectacular job growth for Long Island,” Huth said.

Owners are willing to pay higher salaries to attract quality employees, noted Michael Alter, president of SurePayroll.

“They are paying more to existing employees to keep them,” especially since “a lot of bigger businesses are hiring,” Alter said.

That’s especially true in New York, which is leading the country in small business salary growth, according to Gaebler.

“Average New York small business salaries have recently been at levels we have not seen for over two years,” he said.

On Long Island, employers are willing to pay more “in certain industries where the jobs are going begging,” according to Dr. Irwin Kellner, the Weller Professor of Economics at Hofstra University and chief economist for North Fork Bancorp. Sectors with hard-to-fill jobs include health care, technology, biotech and accounting, he said.

Increased salaries are less likely for jobs requiring lower skills and educational requirements, Kellner said, adding that rising energy prices will impact consumer spending most at the big box stores and lower-end auto retailers and real estate markets.

“Retailers catering to the lower end are hurting,” he said.

But companies whose customers have deeper pockets may also feel the pinch.

“Rising salaries may be good for small business employees, but it’s bad for small business owners who are already dealing with higher costs for money, gas and raw materials,” Gaebler said.

Relief may be on the way. New York salaries actually decreased on average in May by $80, compared with April, Gaebler said.

“Nonetheless, it may signal that New York’s salary increases have run their course and may be starting to flatten out,” he added. “That’s consistent with a trend that we see across the nation.

Copyright (c) 2006. Long Island Business News.