Future of Business: John Gibson (Paychex CEO) at the AICPA Town Hall

Thank you, Eric. I appreciate you giving me the opportunity to participate, and I really appreciate our longstanding relationship with AICPA and yourself, and really over half a century of partnership between Paychex and the CPA community. So we're honored to be here and glad we can support the CPA community in any way we can.

Yeah. I'm always surprised when the market reacts to something that it expected. I think the Fed, and I think certainly Chairman Walsh, had communicated kind of where the Fed's thinking was. And I think really it's a statement about the strength of the underlying economy and really the labor market. The Fed has two core mandates: try to keep inflation at a target, and that target's 2%. We've been above that for about five years. And the second is full employment, the mandate on employment. So you're always trying to balance those two things. And so I think what you saw in the increase of a quarter percent was the Fed is very focused on inflation right now. It's one of the biggest issues facing small businesses, as I'm sure everyone on this call hears all the time, dealing with inflation. And I think it's fair to say there are other factors, as all of us know: oil prices, potential impact of trade disruptions, tariffs, etc., that really tilted, I think, the Fed's fear of trying to lean into inflation. But I think they're doing that. I think it's important to understand that they're doing that because when you look at the underlying data, the economy is exceptionally strong, even given all the kind of craziness that goes on in the headlines and what's going on around us. So I think the feeling is that the economy can take this quarter-point increase, that we can do the quarter-point increase and not damage the labor market because the labor market continues to be very strong. I think there's no question you're going to see a higher cost of capital coming for small businesses, or most small business loans are indexed to the prime rate. And so we're soon going to see that. But what I always explain to people is I'd much rather take a quarter point or a half point on the prime versus a one-point increase in inflation. Inflation is just a killer for small businesses. It's a killer for growth in the economy. So I think that's where the Fed is right now. I think what I can tell you is it's now a weekly, daily game that we're playing. I'll be back in New York the first of October for another Advisory Board meeting. We're communicating. They're really looking at the data to make sure not only how the markets are performing, quite frankly, but more about how the underlying economy is performing and how the labor market is performing.

Yeah. So the Paychex Small Business Employment Watch has been around since 2014, and we track two essential factors: job growth in small businesses and wage inflation, or wage growth, inside small businesses. We tend to focus this report on employers with less than 50 employees. We do regularly, when I do my updates on Squawk Box, provide a broader perspective on larger clients as well. And really what we set it out to be is we had this wealth of data. We've been sharing it with the Fed and Treasury and other policymakers for some time. And we decided we'd make it public, and that way we could start to share it with our partners, including AICPA firms. And so it's first to market. It's every Tuesday of the BLS jobs week. And it really offers you a good look inside small businesses. And what I like about it, and what the Fed likes about it, is it's not a survey. This is actual live data. We're looking at punch-ins and punch-outs on a daily basis. We're looking at actual payrolls. We're actually looking at actual wages. We pay one in 11 private-sector workers across all the states and all industries. So it's become a really trusted source for policymakers. As a matter of fact, Eric, one of the things I would tell you is we were talking to the Treasury three times a day during COVID. That's how often we were giving them readings on what was going on in punch-ins. So it's a pretty powerful data set.