Small Business Jobs Growth Remains Strong In June Quarter

Cooling wage growth eases pressure for small business owners

Xero, the global small business platform, today released its Xero Small Business Index for the June 2023 quarter, which showed small business job growth remained strong despite flatlining sales.

June quarter at a glance

• Job growth averaged 6.9% y/y for the June quarter
• Sale growth averaged 3.9% y/y for the June quarter
• Wages growth averaged 3.5% y/y for the June quarter
• Small businesses waited 24.2 days to be paid in June

Jobs rose 7.3 percent year-on-year (y/y) in June 2023 and averaged 6.9 percent y/y growth for the June 2023 quarter, above the 2022 average of 6.1 percent y/y.

Xero Country Manager, Bridget Snelling said this strong jobs activity - coupled with cooling wages growth - stands out as a mark of Kiwi small business strength and their ability to adapt to change.

Over the June 2023 quarter, the strongest average monthly jobs growth was in other services (+10.3% y/y) and hospitality (+9.6% y/y). The weakest industry over this period was real estate (+4.0% y/y).

By region, average jobs growth in the June 2023 quarter was led by Otago (+10.9% y/y) and Canterbury (+9.2% y/y). Hawke's Bay recorded 3.7 percent y/y average growth over the same period.

Alongside strong jobs growth, wage growth cooled to just 2.9 percent y/y in June 2023 and averaged 3.5 percent y/y for the June 2023 quarter.

“This downturn from the significant peaks seen throughout 2022 will likely be welcome news for many small business owners across Aotearoa New Zealand,” says Snelling.

“Many small business owners will be relieved to see wage growth begin to realign with the long term average (+3.9% y/y) after peaking at 6.5 percent y/y in November.

“However, lower wages could also point to more pressure for household budgets and a potentially further flattening of sales.”

Manufacturing (+3.8% y/y), professional services (+3.8% y/y), construction (+3.7% y/y) and hospitality (+3.5% y/y) had the largest wage rises in the June 2023 quarter.

Kiwi small business sales consistent with recession

Sales rose 5.9 percent y/y in June 2023, with an average growth of just 3.9 percent y/y in the June 2023 quarter.

This was down from a 4.2 percent average for the March 2023 quarter, and well below the 12.9 percent y/y average over the whole of 2022.

“While 5.9 percent year-on-year growth may seem positive, this is still a step behind the latest inflation figures," says Snelling.

“The country officially entered recession during the March quarter, which appears to be having a negative impact on both business confidence and sales.

“As households continue to struggle with the cost of living, it’s only natural we see people reduce their discretionary spending.”

Despite these overall sales figures, the hospitality sector has seen a resurgence after years of downturn due to COVID restrictions and border closures. In the June 2023 quarter, the sector recorded an average monthly sales growth of 10.2% y/y.

Small Business Index highest since Nov ‘22

The Xero Small Business Index rose 22 points in June to 140 points, its highest level since November 2022.

“This Index result is driven by the strong jobs growth figures, while the reduction in rising wage pressure is giving small business owners room to breathe,” says Snelling.

“Overall, the XSBI results reflect a level of resilience in Kiwi small businesses, despite the weaker sales data being consistent with New Zealand’s recession.

“Despite this, the road ahead is still challenging for our small business owners. They continue to walk the tightrope to balance books and maintain their bottom line while still providing for their staff and themselves.

“We can take solace in the fact the Official Cash Rate seems to have plateaued at least for the time being, which hopefully translates into a slowdown in mounting financial pressures for households and business alike.

“We encourage small business owners to consider the digital tools available to them in order to manage their cash flow during these trying times, as well as encouraging Kiwis to pay their invoices on time where possible to support the flow of money through the small business economy.”

For further information on the Xero Small Business Insights June quarter metrics, please refer to the XSBI New Zealand update. To find out more about how the Xero Small Business Index is constructed, see the methodology.

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