Gusto economist: small businesses added 120,000 jobs in March, strongest growth since 2022

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I'm doing great.

Thanks so much for taking the time. Uh we were very excited to dig into uh some of your research and reporting. Uh but since it is the first time on the show, would you mind introducing yourself, some of your background, and what you do for a living?

Sure. No, I'm an economist by training currently working with Gusto. previously been through the tech industry at Glass Door, at Zillow, at a company called Convoy. Started my career at the Treasury Department.

Okay. So, uh maybe maybe start with like what what is unique about being an in-house economist? Uh what what data do you have access to that others might not? What data is anonymized? Like, how do you do your job? And what are you actually looking for? What are the questions that you're trying to answer even? So, most economists play with this public data that the government produces. That's great. It's been around a long time. Yeah. The really exciting thing about being an in-house economist is that there's all of this data behind this private wall gate. Um, we get to understand what is happening in the economy. You know, sometimes we pick up on things before the official data say, sometimes we pick on trends that the official data aren't necessarily showing, kind of what's happening beneath the surface. So, it is this really exciting place to be as an economist. Okay, let's go into some of the findings, but first I want to know about uh like data skew and how you account for the type of customers. You know, we Gusto is a sponsor. We talk about small and mediumsiz businesses. So, I imagine that you have some sort of calibration step where you're adjusting your internal data to some sort of benchmark to make sure that you're not biased towards your particular uh sample set. Right.

Absolutely. Such an important point. Gusto is like a small business payroll platform. Yeah, we do reweight our data so that it reflects the broader labor market, the broader small and mediumsiz business ecosystem.

And how do you do that? Do you have ground truth data that's public that you can that you can uh reference against?

Yeah, exactly. So, you know, the government produces this census of all small businesses um based by on industry and size and so we take that distribution and match our internal data to that distribution.

That makes sense. And then so I mean the big question is the small business jobs report. What is the health of the American economy? What is the health of the small business community? Uh what questions were you trying to answer and where did you where did you wind up?

I mean every month we get this headline jobs report from the the BLS. We're watching for this Friday. I think what we're trying to do with the small business jobs report is get a much um firmer pulse on what's happening with small businesses in particular. So businesses with less than 50 employees. you know, that is the majority of of businesses in the American economy, but just a small minority of total employment. So, it often gets um buried in the headline jobs numbers. And we know it. They're they're a driver of job growth. They're a driver of innovation. They're a driver of um kind of the breadandbut work that gets done in our economy.

Yeah. And where where does net hiring stand? Uh give me some of the headline numbers. Uh what are expectations? What should we what should we by default assume is happening? I mean there's a lot of doom and gloom in the economy honestly broadly because of geopolitical conflicts and nervousness around AI but what are you actually seeing?

You're right there is a lot of doom and gloom. Our headline jobs number for March showed that small businesses created about 120,000 new jobs uh in March. That's an exceptionally strong number. That's one of the strongest numbers we've seen since 2022. Yeah.

Um and you know I think it's important to note that's not an outlier. other kind of payroll providers are showing similar strength. So I think this narrative that we all have in our minds of uh the great freeze kind of business is paralyzed by uncertainty that's in some ways uh last year I think 2026 is shaping up to be the great unstucking after being stuck last year.

That's amazing news. Uh do you have any do you have any thoughts on uh you know I can throw out a bunch of uh uh random theories off the top of my head but you know like this is paired with just yesterday Oracle slashing staffing uh over cost like there are big headline attentiongrabbing uh job cuts that are happening at name brand companies and those that news will fly very far because everyone knows Meta, everyone knows Oracle um and maybe they don't know that uh the small business just down the street actually increased headcount by 20% but they only added two people so it's not going to be on the cover of the Wall Street Journal. Um but is there some sort of uh you know how crazy am I how crazy am I to think about you know the large companies maybe being uh overstaffed and maybe changing their business model. So they need to re-calibrate whereas small business small businesses are benefiting from uh artificial intelligence maybe do trying to do more trying to expand trying to compete and so they're actually expanding their labor force even while the bigger companies have like much larger questions to ask about you know what happens over 20 years.

Yeah. Big business scraps big headlines and you think about the shocks that our economy has experienced over the past year the past few years. Big businesses are kind of I say like a big freighter. They, you know, they're a little bit more resilient to the the the tsunami, but they have a really wide turning radius. Yeah. Uh small businesses are like a schooner kind of they're, you know, they have to adapt and and and pivot really quickly in response to these shocks. And I think we saw that, you know, business big businesses are just catching up, whereas, you know, all these shocks we experienced last last year, small businesses are are already ahead of the curve and are thinking about what comes next.

Yeah. If you uh if you were tasked with uh doing job reports for the federal government, how would you approach it uh given your exposure to having access to data sources like gusto? uh you know everyone by now is kind of uh used to seeing a jobs report from the government and then you know a few months later or 6 months later you get these massive revisions and it's sort of confusing and it feels like we have all this real-time data and like the data of people like adding an employee to Gusto and starting to pay them is like much much more obviously accurate real time uh and so it feels like the process could evolve but what's your view? Yeah, I I was a government economist. I have enormous respect for government economists. They have a big job. Their job is to look at the 40-year trend uh in in the economy. These are tools that were designed um you know over multiple decades. The reality is kind of there is so much data exhaust real world exhaust right now in our economy that we can capture and and companies like like Gusto are you know we don't have data from 1963 but we have kind of much better data from what's happening right now and so I think you know the the two go hand in hand they complement each other one's going to give us that longer more stable view of the economy the other's going to give us these these deep windows into these uh you know what's happening in different parts in real time

do you have any insight into uh subcategories of jobs, how job titles are changing. I'm I I keep using this example that we're we're a small business. We have 10 people on staff and uh we have Tyler, our you know intern who's basically a full-time software developer as well as a co-host of the show uh in a hybrid role. We have other folks who have vibe coded whole systems and uh but in a previous in a previous business if I was building a media company I would have had to think extremely hard about developing like a software engineering organization and that would have I would have assumed that would have been extremely costly a very big build versus buy decision. Instead it was just oh we hired Tyler because we liked him. He can do a bunch of different things and he starts vibe coding and all of a sudden we have six systems and they all work really well. And so we've we've become like this hybrid tech media company. We're developing video games now, too. That happened randomly. Uh but we're not a game studio. And so I'm wondering about just are you seeing any data that suggests that more people are picking up hybrid technology jobs or software engineering jobs or even if the titles are changing yet? Anything you're seeing on that side?

Yeah, everything's in flux right now. kind of I think all the the traditional lines that that used to be bright lines of businesses are being blurred. People are taking multiple hats. Uh you know, founders are doing more things. You raised a really good point. You know, you think about how does a big business hire? You know, you ask for a head, the head goes to your manager, the manager sends it to finance, the finance sends it to to recruiting, etc., etc., etc. Uh and that's, you know, a week here, a week there, you're talking about months. When the small business hires, when you hire, they decide, oh, we need someone yesterday. Let's hire them on next week or or the week after.

Yeah. Yeah. Uh what what uh what economic data points are you tracking that are potentially upstream of small business hiring in uh in particular because you know we we we all know uh you know gas prices surge, consumers feel pain at the pump, they cut back on travel, the economy potentially decelerates. There's there's these like logical chains and then you know in the big companies it might be like interest rates or something geopolitical risk or tariffs or there's all sorts of things that could drive you know hiring at the large scale. What what what are the biggest needle movers that you would watch that might lead to some expectations about what might happen over the next couple months in the small and medium-sized business market? Yeah, I mean obviously you look at things like kind of hiring and job openings that's that's plans that are already in place but almost more important than that I think is sentiment you know expectations particularly among decision makers who have the power to shape the future um so you know things like kind of CFO expectations CEO expectations that's how business leaders are thinking about um the future and and you know future is partly prediction future is partly creation

yeah Do you h how good are those surveys? I feel like I've been a hiring manager for maybe like 15 years now. I don't know that I've ever answered a survey. Maybe I just did it and I forgot about it. But uh is it is it broad-based? Are you confident that enough CFOs are are uh are actually picking up the phone or answering the survey? Because you could imagine that some of the most high-erforming managers are too busy hiring people to answer questions about whether or not they're going to hire people.

Totally. And this goes back to the conversation we were having about the the strengths and weaknesses of different data sources. When the government goes out and surveys people, there's a lag in response, bias in who who who responds. When we're looking at payroll data, that's not kind of responding or not. I I see what you you're doing. And so in some ways, you know, that just gives particularly for smaller businesses where people are busy, they're not picking up the phone, uh they don't have time to twiddle their thumbs, uh kind of responding to a government survey. Um that's that's capturing a real real real phenomenon.

Yeah. How how are you thinking about feeding that into uh Gusto's actual product offering? Because I I could imagine if I'm in there hiring someone and I sort of get like the the survey after I hired one people. Hey, planning to hire more people next quarter and it's just a you know like leave a fivestar review type thing on an e-commerce website. That would probably a very high uh you know survey completion rate. Are you looking at uh doing more to get like qualitative or quantitative data that's more optional from the user base?

That's a really cool idea. I I certainly have not thought about that. You got to pitch it. Yeah. Serving people in the platform that's that's something we haven't really done a lot of but but cool idea.

I would love that because even just more qualitative just you know with LLMs there's so much that you can do to compress down qualitative data and whatnot. Like there's so many interesting things you could do.

How is how is AI changing your approach to work?

It's a great question. Yeah, I obviously kind of it's completely transformative. Um it's it's transforming the way certainly I work as an economist. I think it's transforming how everyone works. It's transforming how businesses start and and hire. I think there's just a growing body of evidence that it AI is making it a lot easier to to start a business to incorporate to do all of that uh front leg work. And on top of that um it is changing kind of the skill profile that that you need when you hire. You need more of these people who manage processes um particularly at the start.

Yeah. And and then day-to-day uh I would randomly predict like IPython notebooks a few years ago. Is it all like command line prompts today? How is that changing for you?

Yeah, I I mean kind of I still work a lot in in Python. Um, but you know, I'm doing more things at once and I I think that's true for most economists kind of anyone who's you know kind of in some ways it's lowered the the the the barrier to getting that data and that's great because that accelerates decision-m that helps these businesses adapt in real time and pivot to a rapidly changing world.

Yeah, it's very cool. Uh what a fun position to be in. Uh congratulations on the success and thank you. I'm sort of laughing in in my head about imagining you if you had like a secret LLM subscription back when you were working as an economist for the federal government. They're like, "How how is lean? How is how does Aaron do what he does?" Just sitting there.

True.

Anyway, thank you so much for taking the time to come chat with us. We'll talk to