Small business job growth holds pace in May: RPT

Paychex CEO Martin Mucci joined Yahoo Finance Live to break down what's going on with small businesses, their attempts to hire and what America can expect from this Friday's upcoming jobs report.

Video Transcript

ADAM SHAPIRO: Martin Mucci is Paychex CEO. He's going to join us now to talk about what's going on among small businesses and their attempts to hire. And this is as we're all prepared for Friday's employment situation report from the Labor Department. What do you see that may indicate of what we can expect on Friday?

MARTIN MUCCI: Sure. Well, it looks like this month-- after the big increase last month, of course, over year over year-- we had a little bit of a slight decline, or moderation, in May over April. And while leisure and hospitality continues to be a very strong sector, construction actually for the first time in over two years slowed a little bit. So jobs around construction slowed down a little bit. You know, that could be because of the supply chain issues. Also, it is difficult to find workers right now. And I think that's causing a little bit of a slowdown in a pretty robust recovery.

SEANA SMITH: Yeah, Marty, what are you hearing from small business owners about the ability to find workers? We talked about that after the big jobs report that we got out last month. We're probably going to hear about it again on Friday. But I guess, what do they attribute this huge issue to?

MARTIN MUCCI: Well, I think, you know, Seana, as last month, I think the unemployment boost, the extra unemployment that's there-- $300 a week-- that's certainly causing some concern and difficulty bringing people back. Also, the stimulus money that's been put out over the last couple of months really has got people pretty cash-- good on cash right now. There's a cash surplus. People are building up savings accounts. They're paying off things. They're not feeling as much pressure, at least immediately, to get back to work.

And then of course, there's just overall COVID health concerns about coming back, the mask policy that's changing very much now. And then child care-- you know, it's not quite consistent yet. Schools aren't consistent yet. So all those things combined are making it tough, especially to get frontline workers back to the jobs.

ADAM SHAPIRO: I'm not going to win any friends among small business owners with what I'm about to ask you. But if this is the market, shouldn't they be paying more-- and I'm talking more than the $15 an hour-- in order to attract people back into these positions?

MARTIN MUCCI: Well, you're right, Dave. And that's what's happening. I mean, you're seeing not only are the wage rates sometimes starting at $17 or even $20 an hour to get people back. You're also seeing even upfront bonuses for the first time, I think, pretty much any time I've ever seen, where you're offering $500, $750 to get frontline workers back to the job. So you are going to see that it will put pressure on prices. And it does put extra pressure on small businesses now that are trying to come back and recover from this tough period.

SEANA SMITH: Yeah, Marty, do you think we're going to see more small businesses fail as a result of that because not all small business owners are in a position to be able to do that?

MARTIN MUCCI: Well, you could. However, there's still-- even though the PPP loans and the grants are pretty much stopped now, dried up, what you are seeing is there's still employee retention tax credits. If you bring employees in or you retain the employees you have, you can get up to $28,000 a year in credits. And you can keep the cash you have today. It's not credits against future taxes. It's actually credits cash flow today that you don't have to submit the taxes that you withhold.

So there are ways to help fund this. But I do think, as David said, you're going to have to increase wages probably to get some of these folks back. I don't think you'll see more businesses go out, because the demand is up. But you never know. It's a little bit dicey out there right now.

ADAM SHAPIRO: What are you hearing from your clients about their ability, their strategies to retain current employees? I mean, there's one large company-- Gap is offering $300 bonus to 70,000 people. But if you're a mom and pop store, you can't compete with that.

MARTIN MUCCI: No, it is very difficult when you're a small shop. But I think what you're trying to find is flexibility. They're offering as much flexibility as they possibly can. [CLEARS THROAT] Excuse me. And they're also offering more benefits where they haven't before. You might have health care for part-time workers that you didn't see before, and retirement plans that you hadn't seen, and also maybe an ability to even pay off some of your tuition and loans that you've had from college.

So small businesses are being very creative as much as they possibly can to attract and retain those workers. But again, some of the help from the federal government is still helping, like employee retention tax credits. It can make a big difference to companies.

SEANA SMITH: Marty, Texas is a state that's leading the way once again this past month on this. They were the leader also when we talked in April. What's Texas continuing to do right, and what can other states learn from when they look at Texas and their ability here to attract small businesses?

MARTIN MUCCI: Well, certainly there is one. There's a migration toward southern states like Texas and Florida that's bringing more workers in. Second, oil continues to be strong. And so when you see oil be strong and provide jobs-- and all those jobs around that, so it attracts more employees in. They build houses. Now you have a lot of small businesses opening restaurants. Contractors, roofers, landscapers-- all of that starts to build. And Texas has been pretty strong for quite a few years now.

But overall, that migration to the South of having more people available certainly helps. There also is lower minimum wage down in Texas, Florida, and in the South in general. And that also helps businesses get started and sustain that a little bit more.

ADAM SHAPIRO: Last question is perhaps where we started on Friday when we get the jobs report. How big an increase do you expect to see in the hiring of the leisure and hospitality industries?

MARTIN MUCCI: I think leisure and hospitality will continue to be strong. I think the numbers we saw this month are surprising from the construction standpoint. And so I do think that'll be a bit of a damper on the number. I would still expect the number to be pretty strong-- over 500,000, maybe 700,000 jobs-- but not yet shot over the million like we were hoping for last month and got pretty surprised. So I would still think it'll be strong. But it's going to be a lot of leisure and hospitality and a little less in the construction in other areas.