Martin Mucci, Paychex CEO, joined The Final Round to discuss the September Small Business Jobs Index released by Paychex and IHS Markit and how the pandemic has impacted small businesses in the US.
SEANA SMITH: Welcome back to The Final Round. The September jobs report is showing that 661,000 jobs were added back into the economy during the month. And when you take a look at small business, we’ve got a new reading out from Paychex and IHS Markit small business jobs index, showing just a slight improvement for the month of September.
So here to help us unpack all this, we want to bring in Martin Mucci. He’s the CEO of Paychex. And Martin, great to have you on the show. Taking a look at the numbers from your recent survey, showing that small business hiring was largely flat, I guess we saw a small uptick in the month of September, but help us better understand these numbers and why we’ve seen job growth begin to plateau for small businesses.
MARTIN MUCCI: Yeah, you know, I think what we’re seeing, Seana, is that, basically, you have small businesses that have been using the Paycheck Protection loans, and they’re starting to run out. I think they’re being very cautious about hiring, and that’s slowing things down. You know, we had a nice bounce back in May, and then it has slowly kind of plateaued to where there’s still growth, they’re still bringing people back, but it definitely has slowed down. We’re hearing about 50% of those who had a loan the first time are looking and hoping for a second one, so we’re hoping that a second stimulus can certainly get approved soon.
SEANA SMITH: And Martin, how critical is the second stimulus, in terms of, just, small business being able to hire, and then how much do you think that would eventually speed up the recovery that we could see for small businesses?
MARTIN MUCCI: Yeah, everything we’re hearing and seeing is very important. You know, we’re getting to the end of many of the loans, as I mentioned, that you know, over 80%, um, I think it was 84% of the surveys said that they are coming to the end of their loans. They really need that second loan to, kind of, keep them going. The demand isn’t quite back for many of the services, or they’re not allowed to fully have the capacity that they need to really make money, and small businesses usually don’t have much cash to carry themselves for very few months, or that will carry very few months, for them to continue. So it’s really important that something gets done pretty quickly and that it also has more flexibility than the loans did before and an easy way to have them forgiven, or just basically forgiven if they’re under a certain amount.
SEANA SMITH: Yeah, Martin, in this recent report it showed that in the northeast, at least, that’s where you saw the biggest signs, I guess, of improvement. Why do you think that is? Is that just because, in the northeast, the numbers are getting better relative to the rest of the country, or is there another reason behind that?
MARTIN MUCCI: Yeah, it’s really because they took one of the hardest hits. The northeast took the hit early and stayed closed, as you know. You know, New York state and other states had more closure. There– the south has been really the strongest, right along from a region standpoint in Florida, the strongest from the state. Construction is helping a lot, and there’s a lot of construction, both residential and commercial going on in the south, and particularly, in the Florida area.
And that’s bringing back and has basically held a lot of jobs for small businesses that are all around construction– roofers, contractors, painters, et cetera. That has continued to be strong, and, you know, when you see that the sales of new, single family homes are up 40% over last August or last September, it’s really amazing that you can see that there’s a lot of home growth, and that’s driving construction, which primarily is helping the south.
AKIKO FUJITA: Martin, you talked about the financial strain small businesses are already under, given the lack of support, particularly with the extension of PPE, or the lack of that as well. I’m curious, when you speak to these small businesses, how they’re looking at some of the winter months as we get into some of the colder weather? We’ve talked a lot about restaurants concerned about customers wanting to stay further indoors, not being able to have the additional capacity outside– how do you think some of the business owners you’ve been speaking to are weighing their options right now?
MARTIN MUCCI: Well, it’s exactly as you’d think. There’s a lot of concern, particularly in the northeast, as they have to bring in those tables and that capacity and have to have everyone inside, and then are limited to how many they can have. It certainly puts a strain on them, and when you have limited capacity– you know, when there was only takeout they could really downsize their staff, at least temporarily. Now that they get back to 25%, 50%, or 60% capacity, they really have to bring in more staff, yet you don’t have the revenues back at the level that you need.
So it’s causing a lot of concern, and that’s why they’re really looking for this stimulus. Now, I do think– so one of the interesting stats that we’re seeing is, you know, new, brand new businesses, new startups are up 20% over last year. So it’s very interesting stat, given this economy, but I think what you’re seeing is that a lot of businesses are reformulating, are finding new opportunities, new things that they can do or shift to in this kind of COVID environment, and that’s a positive note that we can see out there.
SEANA SMITH: Martin, do you have any insight, just in terms of what types of businesses that is– I know you were saying it’s growing from new opportunities, but just in terms of sectors or the types of businesses that are seeing success right now?
MARTIN MUCCI: Well, you know, there was an interesting article last weekend that you can see where someone, for example, who was a trainer, personal trainer, couldn’t get people into the gym, changed over to repairing bikes or doing things like that. You know, you see a lot of people getting into tutoring right now. So they’re very small businesses, some of them.
But you know, you’re seeing a big increase in the number of household employers who are hiring nannies to watch kids, keep them out of daycare, tutors, where they’re keeping their children home to homeschool. It’s really increasing at a very dramatic rate, as you could expect. Now, whether that’s temporary, it could be. Probably through at least the school year, but we’re seeing a lot of those kind of things where they’re looking for opportunities from this kind of COVID environment.
SEANA SMITH: All right, Martin Mucci, CEO of Paychex. Great to have you on the show. Thanks for take the time to join us.
MARTIN MUCCI: OK, thank you.