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Paychex CEO on small business optimism and job growth rate

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Martin Mucci, Paychex CEO, joined Yahoo Finance Live to discuss the company's latest small business employment watch data and what it signals for the recovery.

Video Transcript

SEANA SMITH: Let's talk about the jobs market because we know that's so important here to investors when they look ahead to what's going to be driving things for the rest of 2021. And good news here, small businesses continue to hire. Paychex is out with a new small business survey. And the index is back to its pre-pandemic peak. So we want to talk a little bit more about this with Martin Mucci. He is the CEO of Paychex. And Martin, great to see you. Let's just talk about this jump that we saw last month. What do you attribute the pickup to? Is it all because of the reopening that we're seeing playing out across the country?

MARTIN MUCCI: Well, yes, Seana, it's a really big pickup in the leisure and hospitality. Now we're seeing growth in other areas as well, construction and other services. And, of course, construction, we've seen a boom in the sale of new homes and remodels. But it's really been leisure and hospitality. As the restaurants have opened back up and other hospitality shops, we've really seen a resurgence of people coming back to work. In fact, in our client base, those who weren't processing at one time, businesses who were not processing, are only down 6% in their employees right now. So a little bit of room to go, but a great improvement this month.

ADAM SHAPIRO: When we talk about those workers coming back onto the payrolls, are you seeing a bump up in salaries? And is there a metric you can share with us as to what the average might be?

MARTIN MUCCI: Yeah, you know, it's very interesting because I think-- I'm sure you've heard and you've talked about it-- that a number of businesses that are bringing back leisure and hospitality workers are having a hard time bringing them back because schools aren't fully open yet. That makes it difficult for people to come back to work, as well as the fact that unemployment benefits are still on the high side with the extra kicker that's in there until Labor Day. And so, you're seeing wages up. You're seeing even above minimum wage, everyone pushing for the $15. We're seeing $17, $18, $20. And the average increase in wages over the last year would be over 6% for leisure and hospitality.

SEANA SMITH: Martin, when you're talking to these small business owners, are they more confident about the future now? Or there's still a lot of uncertainty here as they try to plan at least for the foreseeable future?

MARTIN MUCCI: Yeah, I think it's a mix, but right now, I think, much more optimistic, as things have opened back up, and rules have been relaxed to a large degree. But I think there's always still some concern. One, can they get the workers back? That's their biggest problem right now that you talk to any small businesses, you know, their workers are either working from home, or they do it-- they've picked up and done something else.

And it's a little bit tough to get them back because of that, as well as the other issues that I mentioned a few minutes ago. So I think they're very optimistic about the demand that's out there and that's been pent-up. But they're a little bit nervous about the supply of workers that they can find.

ADAM SHAPIRO: Well, that's the kind of thing that worries the Federal Reserve because that then puts pressure on wages and inflation. But which parts of the country do you think that this will be sustained? I mean, we're going to have back to work in New York, but are we going to see a boom in New York? And we are back to work in Texas, but there, it really is a boom, right?

MARTIN MUCCI: Yeah, the south has been the strongest region in Florida, Texas, Tennessee. Those areas have been the strongest most recently. And really, the south has been strong consistently for about over two years now, 27 months. New York has seen a big bounce back because they were so low and closed down the earliest.

But Florida, Texas, Tennessee, Georgia, they've seen pretty consistent good job growth really for quite a few months. And I think they'll continue to see that. There is also, as you know, an influx of workers heading to those southern regions. Now they do pay the lowest wages. Florida has a minimum wage, average wage on those jobs, you know, something under $10 in general, where if you're up in New York state and so forth, it's certainly in the $15 to $16 range.

SEANA SMITH: Martin, we saw a massive jump in that March jobs report. We're going to be getting the April jobs report on Friday. What are your expectations for that?

MARTIN MUCCI: Well, I think it's-- I would assume it's going to be very sizable. You know, we had over 900,000 jobs added last month. And I think you'll see well over a million this month. We're not always a big estimator and guesser on those things. But I would think you'll see certainly north of 1.2 million, maybe 1.3 million jobs, which is all great news to see people back at work.

SEANA SMITH: Martin Mucci, always great to speak with you, CEO of Paychex.