Small Business Checkpoint: Rent pains and payroll relief

Although wage inflation and payroll costs have eased, rising rent, especially in the West, puts pressure on small businesses.

Headshot of Taylor Bowley

Taylor Bowley

June 2024

Key takeaways

  • While U.S. small business optimism rose in May, it remains well below pre-pandemic levels. According to Bank of America internal account data, the inflow-to-outflow ratio, which we view as a proxy for profits, also rose in May but small businesses continue to contend with cost pressures.
  • One such pressure is rent, where we find evidence that small business rent inflation is exceeding that of households. In fact, the average monthly share of rent in total payments through May is 9.1%, up significantly from the 2019 average of 5.9%. This increase is most acutely felt in the West, in cities like Las Vegas, where the average share of rent in May was more than double the national average.
  • However, easing wage inflation has taken some pressure off of small business payrolls. Total nonfarm payroll growth remains strongest in the South, likely due in part to increased population growth. Consequently, we find payroll payments in cities like Charlotte and Tampa are over 30% higher than 2019 levels.

Read our full analysis for a more in-depth look at these trends.

Small Business Checkpoint is a regular publication from Bank of America Institute. It aims to provide a real-time assessment of small business spending activities and financial well-being, leveraging the depth and breadth of Bank of America’s proprietary data. Such data is not intended to be reflective or indicative of, and should not be relied upon as, the results of operations, financial condition or performance of Bank of America.

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