Former President & Chief Executive Officer, Paychex
Small business workers seeing ‘really strong wage growth’: Paychex CEO
Paychex CEO & Chairman Martin Mucci joins Yahoo Finance Live to discuss the labor market and wage growth for small businesses.
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About Martin Mucci
Martin Mucci, former President and CEO of Paychex, appeared on financial news programs in 2022 and 2023 to discuss the company's performance and labor market trends. In a March 2023 interview on CNBC's "Mad Money," Mucci noted that Paychex's stock had increased significantly since he began appearing on the show 12 years ago, and he credited the company's 16,000 employees for navigating challenges including recession and COVID-19. He also discussed government subsidies, stating that programs like the Paycheck Protection Program and Employee Retention Tax Credit had helped sustain businesses, and suggested policymakers "ought to keep an eye on something like that for the future." In earlier appearances, Mucci commented on wage growth and hiring conditions for small businesses. In March 2022, he described wage growth as "really strong" at 4.8% year-over-year, and said small businesses faced pressure from supply chain issues and inflation but had strong demand. He noted that rising interest rates benefit Paychex due to the float it carries, but expressed concern about the impact on clients and new business formation. In May 2021, Mucci attributed a pickup in small business hiring to the reopening of leisure and hospitality sectors, and said businesses were optimistic about demand but worried about finding workers. In September 2020, he reported that small business job growth had held steady after an initial rebound from pandemic shutdowns, and said the PPP program had helped many businesses continue operating.
Transcript (12 segments)
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Brian0:05
The economy created 678,000 jobs in February, but how is job creation doing among small businesses? Paychex's Chairman and CEO Marty Mucci joins us now. Marty, always nice to see you here. So, let's get your take on the jobs report and then, you know, what are you seeing from the small business perspective, which I know is very important to your business.
M
Martin Mucci0:26
Yeah, Brian, very consistent really. I mean, this was a great jobs number this morning, and small business, we saw in our Paychex Small Business Index, was very similar. While there wasn't much growth in the job rate from January to February, we're up about just under 8% over last year from a job growth perspective, and wages continue to be very strong, 4.8% wage growth over last year. And in some regions of the country and in some jobs, well over 5%. So we're really seeing really strong wage growth as well as job growth.
J
Julie0:56
Marty, it's Julie here. I wonder if you can give us even more color on that wage growth in particular, because obviously the headline number there within the jobs report was disappointing, right? It didn't show any growth from January to February. So I'm wondering what you're seeing in your numbers in terms of where that strength is coming from.
M
Martin Mucci1:17
Yeah, that was surprising, and you know, you never know if there'll be some adjustments there because we saw continued growth. It's been about 4.5%, it jumped up to about 4.8% for our index. So we're seeing good, strong wage growth, and I think still overall, even though there wasn't month-to-month change in the national BLS numbers, I do think that you'll probably continue to see that. It's just, as you know, it's one of the toughest things out there right now for small and mid-sized businesses, you know, trying to find people. Wages are going up, you're attracting them with upfront bonuses. The only other thing is maybe, you know, leisure and hospitality took a big jump in the month in the BLS numbers and in ours, and you know, that could be bringing lower wages in. So overall, you're not seeing as much of a change from month to month. That could also be impacting it is the distribution of where the jobs are coming from.
B
Brian2:10
When you're out there talking to small and medium-sized businesses right now, how concerned are they about inflation? And then more importantly, how are they responding to inflation?
M
Martin Mucci2:20
Yeah, it's putting a lot of pressure on them. Supply chain, the inflation, the prices of all of their goods that are coming in. The good news is they have strong demand, so they are going to have to be raising prices, and some are already doing that. You know, when you look at leisure and hospitality, in particular, they're raising their prices, they're paying higher wages, higher costs for their food and supplies and so forth, and they're going to have to react in price. Now, those that can't are really having tighter margins right now in the short term and hoping that that's going to alleviate over the next few months.
J
Julie2:56
Marty, I'm curious if you guys have been raising your prices at all, what kind of input cost pressures you've been seeing, and whether you feel limited by the fact that many of your clients are also under such pressure.
M
Martin Mucci3:08
Yeah, we've held our price increase pretty tightly. We look at prices for different services. If there's higher demand and from a competitive standpoint it makes sense, particularly our HR outsourcing services right now seeing tremendous growth in need from our client set. But we're trying to be very careful with the prices, knowing that the over 700,000 businesses that we serve are feeling the effects. And so we're trying to be very tight on those increases. We typically keep our price increases somewhere in the 2 to 3% range on an annual basis, and we'll continue to look at that and try to cut costs where we can. Mostly our costs are labor costs, but we've done a good job of bringing people in now and getting them trained and up to speed to help our clients.
B
Brian3:52
As someone leading a very large and significant company, Marty, how concerned are you about rising interest rates? Just the threat of the Fed raising 25 basis points in March, whatever it might be, does that change how you think about investing in your business for the next couple of years?
M
Martin Mucci4:09
Well, the investments, especially in a technology business like ours, really are critical that you continue to invest in the business. And we have been very good at finding ways to cut costs in other places to be able to make sure that those tech investments continue to happen. On the flip side of it, as interest rates go up, frankly, Paychex is one of those companies because we carry about $4 billion in float, basically, as we withhold our clients' money to then pay for them. We pay the taxes for them in between that time. We have about $4 billion in float, so an increase in interest rates actually helps our business in some ways. We just don't want it to damage the overall business climate and hurt our clients and the startup of new businesses.
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Brian4:51
Before I let you go, Marty, I do want to highlight, or maybe you could perhaps highlight, some of the efforts your employees are taking to help those in Ukraine right now.
M
Martin Mucci5:00
Yeah, you know, Paychex, our foundation has stepped up to make a donation to Ukraine to help, and we also offered our employees paycheck deduction deductions from their pay if they'd like to make a donation as well. And that has gone up significantly. We just began offering this yesterday to our employees. We've already reached over $30,000 from our employees. There's such great connections to Ukraine, and even if there isn't a direct family or friend connection, you know, they're really just horrified by what they're watching, and they want to give and support as much as they can in money and in goods and services. We're very proud of our employees and how they've stepped up, and we'll stick together and help them on this as well.