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Small business jobs signal good things for Friday's payrolls report

Nicole Sinclair
Markets Correspondent

All eyes are focused on Friday's April jobs report. And a new report released Tuesday suggests we could get a strong number.

As small businesses make up 95% of all businesses in the US, they often lead the way in employment trends. And the Paychex Small Business Jobs Index grew in April to 100.77 versus 100.74 in March.

"With consistent results during the past two months, and the national index representing solid small business job growth, there is greater stability in the current index level than at any other point in time during the past 10 years," Paychex (PAYX) CEO Mary Mucci said.

Source: Paychex

"Small business according to our index this month in April went up a little bit over last month in March but the good news is that we're showing good positive improvement for the first four months of 2016, and actually it's one of the most stable periods we've seen in the last ten years from a positive standpoint," Mucci told Yahoo Finance. "And it's only half a percent less from a growth standpoint than it was at it's peak about two years ago in April 2014. So we're feeling pretty good about small business employment growth right now."

This is not to say there isn't some uncertainty in the air.

"In an election year, a lot of times people make their decisions a little more carefully not knowing what the next administration is going to do. I think small businesses in particular are sensitive to some of the changes that have been happening in overtime rules, in minimum wage rates, and the family leave act--these are  additional expenses--but generally the growth rate is doing okay," Mucci said.

Mucci said that "other" services, which includes personal care, discretionary spending and pet care have has been particularly strong. Meanwhile, hospitality has shown the strongest growth year-over-year. Manufacturing is still at the bottom in terms of growth, hurt by the strong dollar.

"The good news about that is that it shows that there's discretionary income, which is good for small and large businesses."

Source: Paychex

Mucci pointed out that much of the growth in employment isn't for full-time jobs.

"The bad news is much of that is part time. In fact part time employment is up four percentage points of total employment over the last three years, which is a big increase. It makes up almost 10% of the employment now," he said.

Regionally, Seattle is a stand-out for growth, boosted by tech jobs, according to Mucci.The southeast has also been strong, aided by housing. Some areas like Chicago have been hurt by slowing industrial growth, and Texas and the center of the US have been hurt by lower oil prices and fracking, he added.

As for Mucci's prediction for Friday's jobs report? He thinks the economy adds just about 200,000 jobs, reflecting continued steady growth.