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Company News December 14, 2022December 12, 2022


FOUR TRENDS RESHAPING THE SMB ECONOMIC OUTLOOK FOR 2023


Luke Pardue Economist, Gusto 

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As 2022 comes to a close, Economists at Gusto, the people platform serving over
200,000 businesses across the country, took a look at the data and found four
significant developments that shaped 2022. From the slowdown in the Technology
sector – a pandemic superstar industry – to the plateau in remote work, these
are the trends that marked the past year – and will shape the start of 2023.

 1. The Technology sector boom is slowing after significant growth during the
    pandemic, recent layoffs and slowing wage growth point to a continued
    slowdown in the tech sector. 
 2. Bonuses are shrinking – amidst economic uncertainty Gusto data shows that
    bonuses across industries in the professional services sector are shrinking
    in line with large companies including Citi and EY making cuts to employee
    bonuses.
 3. Job growth is shifting away from the west – In 2022 so far, Charlotte, San
    Antonio, and Louisville top the list of cities with the highest employment
    growth rate while seven of the ten slowest-growing cities are located in
    California or Oregon.
 4. Growth in remote jobs levels off – after soaring during the pandemic remote
    work levels have remained relatively flat from April to November of 2022.


THE TECHNOLOGY SECTOR COMES BACK TO EARTH

The first trend marking 2022 was the notable slowdown in growth in the
Technology sector. Employment growth among technology companies had been above
the overall average in 2021 and the start of 2022, but going into the summer of
2022, employment growth in the Technology sector came back down to earth,
matching the overall average. From January to April 2022, employment growth in
Technology averaged 2.0%, compared to 1.4% growth across all companies. From May
through October, however, headcount in Tech grew by 0.9% – matching the overall
average.



Similarly, through 2021 and the start of 2022, we had seen termination rates at
technology companies well below the economy-wide average: from January to April,
the involuntary termination rate for tech averaged 0.8%, compared to 1.1%
overall. But in the second half of 2022, the rates of involuntary terminations
have risen to match other industries, with both Tech and the overall average
sitting at 1.2%.




PROFESSIONAL SERVICES FIRMS SHRINK BONUSES

Across all industries, 2022 saw little movement in how companies handed out
bonuses. Figure 4 displays the average size of a bonus given out by all
businesses on Gusto’s platform along with the percent of employees receiving a
bonus in each month. Last month, for instance, the share of employees receiving
a bonus has remained stable (6.2% this November vs. 5.9% last year), but we have
seen the average size drop by 7% ($191 in November 2022 compared to $208 last
year).


FIGURE 4: AVERAGE SIZE OF BONUS & PERCENT OF EMPLOYEES RECEIVING A BONUS

There are, however, significant differences in how companies are handing out
bonuses ahead of the end of 2022 across different sectors, as shown in Table 1.
Firms in the Goods-Producing/Logistics and the Personal Services sectors – such
as Transportation, Warehousing, Retail, and Food & Beverage – are still handing
out bonuses in similar sizes to last year, as they continue to navigate a tight
labor market and strong consumer demand. As Professional Services firms enter a
period of slower growth, end-of-year bonuses are shaping up to be significantly
smaller than last year. In November 2022, the average size of a bonus in a
Professional Services firm was $438, 16% lower than the $520 average last
November. Within Professional Services, the largest decreases have been seen in
Finance (-31%), Communications (-27%), Real Estate (-26%), and Technology
(-19%).

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TABLE 1: AVERAGE BONUS SIZES, BY SECTOR, NOVEMBER 2021 AND 2022

SectorAverage Size of Bonus,   November 2022Average Size of Bonus,   November
2021Percent
Change,   2021-2022Goods-Producing/Logistics$188.74$176.237.1%Personal
Services$108.88$108.750.1%Community Services$176.99$197.93-10.6%Professional
Services$425.34$511.91-16.9%Source: Gusto platform data.


TABLE 2: AVERAGE BONUS SIZES IN PROFESSIONAL SERVICES INDUSTRIES 

SubsectorAverage Size of Bonus,    November 2021Average Size of
Bonus,   November 2022Percent
Change,   2021-2022Accounting$371.01$406.079.4%Consulting$442.24$468.275.9%Insurance$359.44$350.42-2.5%Other   Professional   Services$252.24$240.45-4.7%Legal$686.22$595.43-14.7%Technology$692.11$562.55-18.7%Real
Estate$451.04$334.77-25.8%Communications$351.02$254.73-27.4%Finance$873.40$600.96-31.1%Source:
Gusto platform data.


JOBS GROWTH SHIFTS AWAY FROM THE WEST IN 2022

Taking a look at employment growth across the 50 largest Metro Areas in 2022
(January through November), we can see that there’s a large divide in areas that
experienced faster or slower employment growth throughout the year. Across all
firms, employment grew by 11.9% through the first 11 months of the year. Table 4
presents the Top 10 fastest-growing Metro Areas and the 10 slowest growing,
among the 50 largest cities. Among the top 10 fastest-growing metros, there are
eight in the East or Midwest, with Charlotte topping the list at 16% employment
growth. On the other hand, seven of the ten slowest-growing cities were located
in California or Oregon. This shift is likely driven foremost by the slowdown in
growth in Professional Services, and particularly Technology firms, located in
the West, along with faster growth in Transportation, Warehousing, and
Manufacturing companies located on the East Coast and the Midwest.

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TABLE 4: TOP & BOTTOM 10 FASTEST-GROWING METRO AREAS, JANUARY-NOVEMBER 2022 (%)

RankMetro AreaCumulative Employment Growth (%)1Charlotte16.2% 2San
Antonio16.1%3Louisville15.9%4Virginia
Beach15.4%5Cincinnati15.2%6Boston14.8%7Milwaukee14.6%8New York City14.5%9Salt
Lake City14.4%10Minneapolis-St. Paul14.3%41Atlanta9.8%42Jacksonville9.3%43San
Jose9.1%44San Diego8.9%45Portland8.4%46Los Angeles8.4%47Seattle8.1%48San
Francisco7.7%49Sacramento6.6%50Buffalo-3.5%


GROWTH IN REMOTE JOBS LEVELS OFF

Finally, the share of remote workers is beginning to stabilize after two years
of accelerated growth. From March 2021 to March 2022 of this year the share of
remote work increased from 11% to 16%, however from April through November of
this year the share of remote work was nearly flat. While it is still too early
to know for sure what is causing remote work levels to stabilize there are
likely many factors at play. As we enter the new year we will keep a close eye
on how remote work trends evolve. 

This year Gusto released a new Remote Work Data Tracker to help people across
the country better understand how the remote work transformation is unfolding in
real time. The data can be split by age, gender, industry, state, and metro
area, you can dive into the insights here. 

Remote work has forever changed the way that employees and employers interact.
In the last two years many new business and societal implications of remote work
have become evident. Remote work increases hiring opportunities for workers
living outside of major metropolitan areas. Remote work also creates new
challenges and opportunities for HR leaders, employees, and business owners. 

We are still at the beginning of the remote work transformation, as trends
continue to evolve in 2023 we will continue researching this topic.

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 * Data Reports

> Luke Pardue Luke Pardue is an Economist at Gusto, researching how public
> policies help small businesses and their workers thrive. He received his Ph.D.
> from the University of Maryland, where he studied the effects of government
> programs on disadvantaged populations' housing and labor market outcomes. Luke
> currently lives in Washington, D.C. Read more

Quick note: This is not to be taken as tax, legal, benefits, financial, or HR
advice. Since rules and regulations change over time and can vary by location,
consult a lawyer or HR expert for specific guidance.


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