Amid Recession Fears, Paychex Seeing No ‘Signs of Deterioration’: CEO
With inflation at a 40-year high, “there are concerns for the potential of a recession in the near future,” said Paychex CEO Martin Mucci on an earnings call Wednesday for fiscal Q4 ended May 31. “We continue to monitor key leading indicators for any signs of a change in the macroeconomic environment, but have not seen any signs of deterioration at this time,” he said.
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The first signs of a “macroeconomic recession” typically would be “a decline in employment levels at existing clients, an uptick in non-processing clients or a slowdown in sales activities,” said Mucci. “These indicators continue to trend in a positive direction.”
The monthly Paychex small business employment index showed May was the 12th straight month of hourly earnings gains, though there was “a bit” of a slowdown in the pace of job growth, said Mucci. “This is more reflective of being near full employment and the difficulty of finding employees,” he said. Job growth at U.S. small businesses “remained strong in the face of a tight labor market and inflation pressures,” he said.
Amid the current challenges with hiring and the rising costs brought on by inflation, “we address head on the need for businesses to operate more efficiently,” said Mucci. Paychex “onboarded” more than 1.7 million “client employees” through “a completely digital experience” during the fiscal 12 months ended May 31, he said.
Paychex projects total revenue growth in the new fiscal year will be “in the range” of 7% to 8%, said Chief Financial Officer Efrain Rivera. The outlook “assumes” no change in “the current macro environment, which as all of you know, has some uncertainty,” he told analysts and investors.
We “don’t know" where inflation “is going to be” in the fiscal first half ending late November and fiscal 2023 ending late May, said Rivera.