Employment Is Steady, Manufacturing is Contracting, Predictive Scheduling Issues

Hey everybody, it's Gene Marks, and welcome to another episode of the Paychex Thrive Week in Review. This is where we take some items in the news that impact your small business and my business, and we talk a little bit about them. Now, before we get started, you know the new year brings new regulations, right? So, our 2026 Top Regulatory Issues webinar tackles some of the key updates your business should know and how your compliance obligations might be impacted, and I'm involved in this webinar, too. The on-demand video is available now and you can watch the full recording at the link in the show notes. And coming up on Thrive, we're diving deeper with a follow-up episode featuring answers to the top questions from business owners. Follow and subscribe so you don't miss it. All right, let's go to the news. First of all, we're going to talk about this month's Paychex Employment Watch Report, and the headline is this; U.S. small business employment remained consistent throughout 2025. The Paychex Employment Watch Report shows that in 2025, small business employment and wage trends remain steady without dramatic change. The Small Business Jobs Index, which tracks payroll data from firms with fewer than 50 employees, hovered around an average of 99.67 for the year, reflecting minimal variation in hiring. Hourly wage growth was modest, finishing the year at 2.71%, very close to inflation, and staying below 3% for the 17th consecutive month. The data suggests a labor market for small employers that's stable but not expanding rapidly, signaling a predictable hiring conditions amidst a broader economic climate of moderate growth. So, the takeaway is employment of small businesses with less than 50 employees, according to Paychex, stayed resilient during 2025. Wage gains were up a little bit below 3% at 2.71%. So, if your business is in that sort of category, you're not alone. Most small businesses are that way, as well. Will we see an uptick in hiring? Are you planning on hiring next year? That kind of remains to be seen depending on your business and the industry that you're in. But, right now, the hiring outlook among my clients is not extremely strong, but it is one that people are not letting their existing employees go. They're replacing jobs, and quite a few of my clients are waiting for AI to really take hold where they can get even more productivity out of their existing workers. Want to make sure I'm clear. Nobody I'm talking to is planning on firing workers because of AI. They just want to take advantage of the productivity benefits. All right, even though hiring remains strong, I'm going to go – er, resilient – among small businesses, the world of manufacturing has not been strong this year. According to a new report, the Supply Management's Purchasing Manager's Index, U.S. manufacturing dropped again to the lowest point of 2025 in December. The index dropped to 47.9% in December, which is below 50%. Anything above 50% is expansion, anything below 50% is contraction. Now, by the way, this is the Supply Management Purchasing Managers Index. This is an index that comes out every month – I follow it closely – from an organization of supply managers that submit data about what they're purchasing, the operations, and profitability of their companies, particularly on the manufacturing side. So, it's based on actual real data that's compiled by the Institute of Supply Management every single month. So, we've been in contraction. Weak demand and ongoing tariff uncertainty were cited as key factors weighing in on the sector, despite some slight improvements in select demand measures like new orders and backlogs. So, that is fairly good news. Only a few industries such as computer and electronic products actually saw expansion. Employment and manufacturing remained weak with many firms managing headcount cautiously. The report underlines a struggling manufacturing sector heading into 2026 amid broader economic challenges. Now, the data isn't here from this blurb, but I think manufacturing has been in contraction for at least a year. I mean, the whole year that I've been following this index, I've seen manufacturing like been underneath that 50% level. So, it's not been a great environment for manufacturing. The promises with all these tariffs is that manufacturing is going to come back to the United States, and manufacturers will be expanding. We haven't seen that yet. Having said that, it is still early days. mean, the new tariffs didn't start coming in until the middle of last year. A lot of the president's plans and a lot of the president's promises have to do with a big shift in manufacturing, and that takes time to invest and build capacity and redirect supply chains here. So, we ain't seen that in 2025 yet. Maybe we'll start seeing expansion in 2026. It's been a while since I've seen expansion in the manufacturing sector. Finally, a report from a law firm called Ackerman LLP, and it's about Starbucks. Starbucks had a big settlement related to predictive scheduling, and it's something that would impact you if you're a business that schedules your employees in advance. Let me read to you what the report is. Starbucks agreed to a nearly $39 million settlement with New York City over alleged violations of the city's Fair Work Week law, a landmark action highlighting predictive scheduling compliance for employees. Remember predictive scheduling is you're scheduling your employees in advance, okay? The law requires fast food and retail chains to provide workers with predictable schedules at least 14 days in advance and pay premiums for late changes. The city's Department of Consumer and Worker Protection found Starbucks failed to post or transmit schedules properly and made last-minute changes without required notice or consent. The settlement includes penalties and payments to affected workers and underscores the legal importance of fair scheduling practices. Now, New York City is a big city where predictive scheduling laws are in effect. Other states and cities also have their own predictive scheduling laws, too. So, you want to check with your labor attorney to see if that applies to you. If you are in an industry like retail or like restaurants where you are scheduling your shift workers, you need to make sure that you're in compliance with those laws. You have to give people a 14-day notice as to what their schedule is so people can – fair enough – manage their lives and be aware that if you violate that or you change the schedule and don't tell them or whatever, you could be subject to significant penalties and fines as Starbucks found their out. Now, don't think that just because Starbucks is a big company, they're going after just big companies. A lot of small businesses are subject to this law, as well, depending on where you are, and it's very easy for your local government to make a case out of you. It is not the kind of PR that you want for your firm. My name is Gene Marks, and you've been watching this week's episode of the Paychex Thrive Week in Review. Remember, check out our on-demand 2026 Top Regulatory Issues webinar. It is really informative. There is a link to it in the show notes and we'll be doing another podcast episode where we will answer questions about that webinar that can be submitted if you are so interested in doing so. In addition to that, if you would like some help or tips or advice in running your business, sign up for our Paychex Thrive newsletter. Go to paychex.com/thrive and you can get it there. Again, my name is Gene Marks, thanks for watching this week. We'll be back to you next week with more news that impacts your small business and some thoughts on that. Have a great week everyone. See you then. Do you have a topic or a guest that you would like to hear on THRIVE? Please let us know. Visit payx.me/thrivetopics and send us your ideas or matters of interest. Also, if your business is looking to simplify your HR payroll benefits or insurance services, see how Paychex can help. Visit the resource hub at paychex.com/worx. That's W-O-R-X. Paychex can help manage those complexities while you focus on all the ways you want your business to thrive. I'm your host, Gene Marks, and thanks for joining us. This podcast is property of Paychex, Incorporated 2025. All rights reserved.