Optimism and Pause from Banks and Manufacturing, Google Lauds AI Ad Tools

Hey everybody, it's Gene Marks, and welcome to this week's episode of the Paychex THRIVE Week in Review. This is where we take a few items of news that happened in this past week and we talk about them a little bit because they impact your small business and mine.

So, the first article or the first piece of news that came out this week has to do from banks. Now, big bank earnings – this is reported across all the financial publications – big bank earnings paint a picture of a surprisingly resilient U.S. economy, but one that's facing growing risks.

First, consumer and business activity remained strong with solid spending, stable credit quality, and continued job growth supporting bank profits. Second, Wall Street divisions, especially trading and investment banking, are thriving and market volatility and increased deal making boosting overall earnings.

However, the third takeaway is more cautionary. Risks are rising. Bank executives, including leaders at major institutions like JP Morgan Chase, warn that higher energy prices, geopolitical tensions, and growing credit balances could begin to pressure consumers, particularly lower-income households.

The bottom line is that the economy is holding up better than expected for now, but warning signs, especially around inflation and consumer stream, suggest that stability may not last indefinitely.

My take on this is that I've been hearing this for a while now, since … I look closely at bank earnings every quarter because we live in a capitalist society and what better makes up capital than our nation's banks, which happen to be also the largest banks in the world or among the largest banks in the world. And I am telling you, quarter after quarter, I have seen our nation’s banks – Wells Fargo, Citibank, TD Bank, as well as obviously JP Morgan Chase is our biggest one – all report stable and strong earnings and good credit balances and ratios. This has been going on for the past year at least.

Now, they've also said every quarter that there are risks in the economy. But boy, oh boy, I mean right now when I look at just the banking industry alone – and remember capital is a big part of a capitalist society – right now, the banking industry is pretty strong and fairly stable.

Now, again, there might be certain things that might be an issue in the future, but as a business owner, if you're looking for loans, but also if you're looking just for a little peek into how the economy is going, the banks are telling you and they're basing this off of real data that, as far as they're concerned, so far the economy has been going pretty good.

The next also has to do with the economy, as well. This comes from a number of different reports that came out within just this past week, as well as over the past month or so, and it's about manufacturing. Manufacturing, according to many reports, has been rebounding in the U.S. and deserves some looking into. U.S. manufacturing is showing renewed momentum, but of course, rising input costs are complicating the picture a little bit.

The National Association of Manufacturers reports improving optimism among manufacturers supported by strong demand and easing supply chain issues. Key indicators reinforce this trend. The ISM Manufacturing PMI shows its fastest expansion since 2022, while regional data from the Federal Reserve Bank of Philadelphia and the Federal Reserve Bank of New York points to rising manufacturing activity in April.

However, of course, inflation does remain a concern. The producer price index accelerated from 3.4% to 4%, signaling higher input prices that could squeeze margins. For business owners, the takeaway is mixed. Demand is strengthening, but cost pressures are back, making pricing strategy and cost control more critical than ever.

I don't know about you, but I'm also seeing the same thing. I don't know if this is because of tariffs or other factors, but many of my clients that are in the manufacturing world or buy and sell from manufacturers are seeing a real uptick in activity with domestic manufacturers. And that just doesn't mean homegrown manufacturers, but also large international and global companies that are relocating more resources to manufacture here in the U.S. I do believe it is because they are trying to keep things stable and avoid tariffs.

And by the way, it's not just avoiding the cost of tariffs, (but) avoiding all the uncertainty around them, I think that's why a lot of bigger companies are investing in more manufacturing facilities here. Plus, thanks to the Tax Reform Act that got passed last year, there are significant incentives, big deductions for manufacturers to build new facilities here in the U.S. They can basically do it and write off most of their costs for doing it in the first year. So, I think because of that, we are seeing a lot of manufacturing start to pick up here in the U.S., and now the data is starting to show it for sure.

My advice to you, check out that ISM Manufacturing Report. It's the Institute of Supply Management. They publish their report every month based on their members; real data that their members provide to this organization. It will really give you an idea as to how manufacturing is growing. I thought it was a blip, but they're reporting for the past three months manufacturing has been an expansion. So, that is something good to be seen.

So, banks showing the economy is resilient. Manufacturing seems to be growing in the U.S., as well. Will this be part of a longing trend? We will say.

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All right, let's move to our final piece of news today: our AI news of the week. This news comes from a site called DigiDay – and I reported it in my weekly Forbes roundup, as well – has to do with Google. Google is saying that its AI ad tools are having a big impact on those customers that are using them. They report that their AI-powered advertising systems are delivering strong performance gains, with some businesses seeing online sales jump as much as – are you ready – 80% because they're using these AI tools.

These tools by Google automate campaign management using machine learning to optimize targeting bidding and creative in real time. The upside is definitely clear, according to Google, reduced manual effort and potential higher returns. But marketers are still divided, according to this report in DigiDay. While some benefit from improved efficiency, others are wary of losing visibility into how decisions are made. I mean, you're letting AI make these decisions for you could be a little complicated.

The growing reliance on automation limits the ability to fine-tune campaigns and understand what's driving results. For small businesses, this creates a tradeoff between convenience and control; Adopting these tools may boost performance, but it also requires trust in systems that aren't always transparent or easy to audit.

Here's my advice to you; If you are doing a lot of Google AdWords or even YouTube AdWords, as well, keep your campaigns as simple as possible and lean into their AI tools. Google is clearly optimizing these AI tools to not only provide better productivity and ease of use for you to get out high-level campaigns, but clearly they're leaning towards these AI campaigns and giving them an extra look-see for their viewers out there.

Remember, you know, something like 80 to 90 percent of clicks are still coming from Google. So, you know, they still are the dominated voice. They're introducing and have been rolling out these AI tools. Strongly recommend if you're doing Google AI campaigns, don't do it the old way. You might want to start from scratch. Really start leaning into these AI tools. I think you will find a lot better ROI. And look, even Google is saying that for some of their clients, it's enabled them to jump their online sales by as much as 80%. That really is a lot.

So that's the news for this week. My name is Gene Marks. You have been watching this week's episode of the Paychex THRIVE Week in Review. Remember, if you need any help from Paychex, go to paychex.com/meetpaychex. If you'd to sign up for our newsletter, go to paychex.com/thrive, and please subscribe to this podcast as well. That way you will keep up to date on all the news and information, tips and advice and trends that are impacting your small business and mine.

Thanks again for watching. We'll see you again next week. Take care.

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I'm your host, Gene Marks, and thanks for joining us.

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