Positive Jobs Data from Paychex, JOLTS Hints at Divide, State AI Laws Are Key

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 some items from the news that affects your small business and mine, and we talk about it just a little bit.

Listen before we get started, I want to tell you something that I personally excited about. Paychex is launching a free five-part webinar series called “AI for Small Business: A Practical Guide.” And look, I talk to small business owners like all the time, and the number one thing is I hear is, “I should be using AI better. I don't know how to use AI. Where do I even start?” Well, this series is going to answer your questions.

Every episode is 30 minutes long. Totally practical. You don't have to have any IT background to get a lot of information and value from this series. So, go to go.paychex.com/AIWebinarSeries. That's go dot paychex dot-com forward slash AI webinar series and register today. We'll also include a link in the show notes below.

All right. Let's get to the news, shall we? The first bit of news this week comes from, you guessed it, Paychex. This week's latest Small Business Employment Watch; The U.S. small business labor market, according to Paychex, continued to strengthen in May 2026 with hiring improvement for the third consecutive month.

Remember, this is a gauge for small businesses which employ more than half of the workers in this country. The small business jobs index rose to 99.34, its highest level of the year and the first three-month improvement streak since early 2023. Now, while job growth accelerated modestly, wage growth remained relatively stable with hourly earnings increasing about 2.73% year over year.

The report suggests that smaller employers continue to add workers despite ongoing economic uncertainty, hiring, borrowing costs and concerns about tariffs and inflations.

Of course, regional and state level data showed broad-based gains with most metropolitan areas also reporting stronger hiring.

Paycheck CEO John Gibson noted that the “sustained improvement demonstrates the underlying resilience of Main Street businesses.”

The report, which is based on payroll data from businesses with fewer than 50 employees, provides one of the most closely watched snapshots of small business employment trends in the United States. I watch it very, very closely. Very, very good news for the labor market.

The overall labor numbers that were reported by the Department of Labor jobs numbers was also very strong and exceeded economists’ expectations last week. So that's good news for jobs.

Now, we have another news item about jobs and that has to do with JOLTS. Indeed, the employee search firm, they're hiring a lab to do an analysis of the April 2026 Job Openings and Labor Turnover Survey or otherwise known as JOLTS. This kind of shows you what jobs openings there are around the country, like the positions that are not filled from employers. As you can imagine, it was historically high before and after COVID and has since come down to more historic levels.

Well, the analysis that Indeed did highlighted a growing divide between large and smaller employers. Job openings among the nation's biggest companies have increased significantly since the pandemic, while smaller businesses, the traditional engine of the U.S. hiring, has struggled to maintain momentum.

The report argues that much of the labor market's apparent strength is being driven by large organizations which have the financial resources to continue recruiting despite economic headwinds.

By contrast, many smaller firms face tighter margins, higher financing costs, and greater uncertainty – limiting their willingness to expand payrolls. Nationally, overall job openings remained elevated, but hires declined to 5.1 million, reflecting a labor market where employers are creating jobs, but not filling them more and they are filling them more cautiously. Hiring Lab, the arm of Indeed, suggests this imbalance could create a two-speed economy.

Now, a few comments on all of this. So, for starters, this number was based on the Department of Labor's number, which is based on a lot of surveys and methodology that in my opinion tends to be older. What we have found is that the Department of Labor says that, obviously, job openings are uneven and that bigger companies are hiring more than small companies and, you know, small companies are resilient.

Meanwhile, I compare that to Paychex's data, which is based on actual real employee data from actual payrolls from the actual information that Paychex has because they manage this information. Well, they have found for the third straight month an increase in small business hiring.

I guess the takeaway is this; Small business hiring obviously has continued to remain resilient – all jobs hiring and open jobs, all those numbers were positive this past week. If you're going to be looking at data and you really want to study at least the small business market look, you know, looking at stuff that comes from the government is fine. It gets revised often. I'm not quite sure I like the methodology as much. I like data based on real data, and that's what Paychex's Small Business Employment Watch does provide.

So, keep an eye on the Small Business Employment Watch every month. We'll continue to report that to you, but I think that what that shows, because small businesses make up so much of the job market, will tell us way more about the job market than surveys or analysis are done by the government. My opinion. My opinion only. Okay.

In this week's AI news, we're going to talk about AI regulation because there has been some moves in this. The White House did release or put forward a new executive order regulating AI. So, I took this on two articles: one was a post actually by a technology expert called Brad Carson on X and another is from a law firm called Akin Gump – talked about state AI laws.

I just wanted to read you out this information about the state of AI regulations right now. There's a growing debate and it's emerging over whether artificial intelligence should be regulated primarily at the federal level or the state level, right? In a recent social media post, a former congressman and AI policy advocate, Brad Carson, argued that broad federal preemption proposals could eliminate virtually every state AI law addressing issues such as labor rights, creator protections, child safety, and consumer safeguards. He contends that states should retain the ability to experiment with stronger protections while Congress develops a national framework for AI.

Meanwhile, the Akin Gump law firm, they did analysis with reached a similar practical conclusion for employers; Businesses can no longer rely on a single AI compliance strategy. A rapidly expanding patchwork of state laws is imposing different requirements around hiring algorithms, employee monitoring, transparency, bias testing, data governments, consumer disclosures. As states continue to legislate in the absence of comprehensive federal standards, employers using AI for recruiting and HR, customer service, or even internal operations should establish governance policies that can adapt to multiple scenarios.

The combined message from both sources is that AI regulation is becoming increasingly decentralized and organizations that proactively build compliance and oversight frameworks will be better positioned than those waiting for a single federal solution.

So, some thoughts on AI for your business when it comes to regulations. The federal government has no law. Congress has passed no legislation related to AI. The White House has issued an executive order, but it has limited powers – and executive orders change when new administrations take over.

It's really the states that are most important. Now, a lot of states around the country, quite a few, are now either launching AI regulations or starting regulations or have already passed AI regulations on all the things I just discussed, hiring practices, workplace practices, consumer disclosures, things like that.

What you need to do is this, whatever states that you operate in, whether you reside there or you're selling into those states, you need to make sure that you're compliant with their AI regulations and state laws – and they take precedence over federal laws. Have a labor attorney or have an attorney, in general, who's familiar with state laws to make sure that or good HR firm like Paychex to advise you on what your what regulations affect your business and where your exposures are.

So, AI regulation, the debate continues between federal and state. I'm telling you now to lean on the state. That is your smartest move.

My name is Gene Marks, and you have been watching this week's Thrive, our Weekend Review. This is brought to you by Paychex. This is the podcast where we take three news items and we talk about them every single week. Hope you got good information from this.

If you need any help or advice or tips in running your business, get our Paychex Thrive newsletter. Go to paychex.com/thrive. To learn more about AI, attend the Paychex AI for Small Business: a Practical Guide, a five-series webinar. You can go to go.paychex.com/AIWebinarSeries. There's a link to that in our show notes. And subscribe or follow us on YouTube and your favorite podcast platform.

Thanks again for watching or listening. We will see you again next week with some news that impacts your small business. Take care.

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.

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