Inflation, Jobs, and Confidence Create Mixed Economic Message, AI Training Expands

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 in the news that impacts your small business and mine, and we talk about it just a little bit.

Before we get started, please know when it gets time to reach this time of year, lists become very important. You know, the Thanksgiving grocery list, the holiday gift list, not to mention the list of people that you want to send holiday cards to this year. Paychex wants to add more – a year-end checklist. But this one makes your annual payroll year-end prep so much more manageable. It includes key deadlines and dates, tax form guidance, compensation planning tools, and even steps to start 2027 outright. Go to go.paychex.com/yechecklist. That's go.paychex.com/yechecklist and check it out. It might even save you enough time to make that extra trip to the grocery store for the yams that you forgot. How cute.

Now, let's get back to the show. This week's show is going to be full of good economic news for us as small business owners. The first bit of news comes from Paychex. It is their monthly Paychex Small Business Employment Watch, which found that small business hiring remained largely stable in September.

The Small Business Employment Watch analyzes data, payroll data, from roughly 350,000 Paychex clients with fewer than 50 employees. The jobs index actually increased slightly by a very, very small amount. It was roughly consistent with its 2026 year-to-date average. The numbers suggest that smaller employers continue to maintain their workforces, but as earnings are showing little appetite for aggressive hiring. Wage pressures also continued to ease. Hourly earnings growth was 2.78% year over year, remaining below 3% and extending a more than two-year trend of moderating wage increases. However, weekly earnings and hours worked continue to increase.

This combination suggests employers are responding to demand partly by giving existing employees more hours rather than significantly expanding headcount. Overall, the September report portrays a small business labor market that is stable but relatively cautious, with hiring subdued and wage inflation continuing to cool.

My take on this is good, it's stable, but one thing just continues to concern me. We read about the news about things being with affordability. There are a lot of affordability issues in this country, the high process of cost of gas, the high cost of rents, grocery store, we all know that. Paychex is reporting that hourly workers – now remember, this is, you know, companies with less than 50 employees, about 350,000 of them – their wages have only gained 2.78% year over year. There are something like 80 million hourly workers in this country, it's a lot. So, this is a sample of them.

And really, when you take a step back, you're like, man, inflation is at 3.2%. That was recently reported. Paychex is saying that hourly wages are up 2.8%. So, clearly hourly workers are still trailing behind inflation.

Now, as a business owners, we're gonna pay what the market can bear. I get that. But the big issue is when will wages increase to the extent where people are making more than inflation? Does it have to come on the employers? Do we need to be increasing wages more? Or is it the government's responsibility to get inflation down more so that these wage increases are more comparable with inflation? That's the big issue because, again, if these workers are not making enough money to you know spend, that's gonna have a big impact on consumer spending, and we all know everything, regardless of what your business does or sell, comes down to the consumer.

But overall, good news for the small business economy, stable employment, and continued rising ranges or wages at around three percent.

All right, I have two other economic reports I'd like to share with you. The first is from the Wall Street Journal. New economic data point to an acceleration in U.S. economic activity but also highlights the stubborn inflation problem facing the Federal Reserve, what we just talked about.

The Commerce Department revised second quarter GDP growth upward to an annualized 2.2% compared with an earlier estimate of 1.5%, reflecting a stronger consumer spending in business investments. Great. A measure of underlying private sector demand, real final sales to private domestic purchasers grew at an even stronger rate, 4.6%. Consumer spending remained robust in August, rising 0.9%, although income growth, we just talked about that, slowed to 0.2%. Investment, including spending related to artificial intelligence infrastructure, helped to support the expansion.

The problem that the country has is inflation. The Personal Consumption Expenditures Price Index increased 3.4% from a year earlier. I said the CPI is 3.2%, so we're in that range. So, it's remaining above the Fed's 2% goal, and like we talked about earlier, remaining above what we're seeing hourly workers making. The combination of a healthy growth and persistent inflation complicates the Fed's interest rate decisions for businesses. The message is mixed. Demand remains surprisingly resilient, but meaningful interest rate relief may remain difficult while inflation stays elevated.

The second bit of news from the economy comes from the U.S. Chamber of Commerce. They report that small business confidence improved during the third quarter of 2026, despite continuing concerns about inflation. This is a new poll that came from the U.S. Chamber of Commerce Small Business Index. The index climbed four points to 70.5, approaching its record that was at 72, which was reached a year ago. Seventy-one percent of businesses describe their own financial health as good, and 72% say they are comfortable with their cash flow.

Owners are notably less optimistic about the broader economy, only 27% considered the U.S. economy healthy, down from 40% a year ago. Inflation, which keeps coming back up, remains the biggest concern cited by 54% of respondents. Nevertheless, 62% expect revenue to increase during the year, 38% plan to increase investment, and 36% expect to add employees. Businesses are also expanding their employee benefits; 46% of businesses surveyed now offer health insurance, 40% offer paid vacation, 31% dental and vision coverage, and 27% retirement plans. This survey covered about 759 small business owners.

By the way, my take on the benefits is sounds kind of low; 46% offer health insurance. Okay, that I can understand. 40% offer paid vacation? You mean 60% of businesses don't offer paid vacation according to their survey? 27% own do retirement plans, which means like what, 73% don't offer retirement plans. I think as businesses we can do a lot better than that. Maybe that's the reason why we struggle to attract good workers from big companies and other organizations.

But the bottom line is this: Both articles in the Wall Street Journal and the U.S Chamber of Commerce both say that the economy remains strong and resilient, and even business owners are optimistic going forward. Paychex reports that among small business, hiring remains strong and hourly wage increases still hover around 3%, but still below the 3.2 to 3.4% inflation rate that we are seeing.

So, relatively strong news about the economy, good for small businesses, but everybody's concerned about inflation and how we can get that down.

All right, in this week's AI news of the week, America's Small Business Development Centers has partnered with OpenAI to bring training to small businesses. This comes from a press release from the SBDC. It's a nationwide initiative aimed at giving small business owners practical training in artificial intelligence. Under the pilot program, small business development centers will receive instruction through the OpenAI Academy and then conduct in-person AI workshops for entrepreneurs around the country.

The initial effort is expected to reach more than a thousand small businesses. The training will focus on practical applications rather than technical AI development, including ways businesses can use AI to streamline operations, improve customer service, and strengthen decision making.

Participating advisors and small business owners who complete the workshops will receive free access to ChatGPT Plus. Beyond the pilot, OpenAI and America's Small Business Development Center's plan to jointly develop playbooks and industry-specific resources that can be distributed throughout the broader SBDC network.

The partnership is significant because SBDC already provides counseling and training to businesses nationwide, potentially creating an established distribution channel for introducing AI tools and skills to Main Street companies.

Hey, if you have not checked out your local Small Business Development Center, this is yet another reason to do that. They are affiliated with the Small Business Administration, the SBA, they have locations at most mainstream major college campuses around the country. In the Philly area, I think there are two within driving distance. That's where I live. The SBDC, you know, provides, you know, free counseling and support, training and services to small businesses. They connect people to finances, they you know do really great coaching, and now they're offering training and AI, as well.

SBDC is a great network, a great organization, and something you should definitely check out. And now, because they're offering training and partnering with OpenAI, they're providing even more resources on AI to help you with your overall business growth.

My name is Gene Marks, and you have been watching or listening to this week's episode of the Paychex Thrive Week in Review. Remember, if you want your checklist for the coming year, go to go.paychecx.com/yechecklist. There will be key deadlines and dates, tax form guidance, compensation planning tools, and even steps to start out 2027 the right way.

Follow us, please on YouTube and on your favorite podcast channel.

And finally, if you need additional help and tips in running your business, sign up for our Paychex Thrive newsletter. Go to paychex.com/thrive.

Thanks again for watching or listening. We will be back with you next week with some more news that impacts your small business and a few comments about that. Look forward to speaking to you then. Take care.

My name is Gene Marks, and you've been watching or listening to the Paychex Thrive Week in Review podcast. A few things to take away. First of all, if you are in need of HR or payroll help in your business, consider Paychex. Go to paychex.com/meetpaychex. That's P-A-Y-C-H-E-X.com forward slash M-E-E-T-P-A-Y-C-H-E-X. Please follow this podcast on your podcast platform or on YouTube if you are enjoying the content so you stay up to date on our latest episodes.

And if you need help or advice or tips in running your business, get our Paychex Thrive newsletter. Go to paychex.com/thrive and sign up for it there.

Hope you found this information helpful. I'll be back with you next week with more news that impacts your small business and mine. My name is Gene Marks. Thanks so much for watching or listening. Take care.

This podcast is property of Paychex, Incorporated 2026. All rights reserved.