Funding Freeze Chills Labor Market, Acquisitions Rise, OpenAI Lessens Research Time

[Gene Marks, host]

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 news items from the week that affect your small business and my small business. We talk a little bit about them, right? So, let's get right to the news.

The first story comes from the Washington Post. The headline in the Washington Post story is “Layoffs are Hitting Contractors and Small Businesses” due to President Trump's cuts in the federal government. The Washington Post reports that private-sector employers and nonprofit vets are starting to lay off workers as a result of the Trump administration's sweeping cuts and funding freezes, unleashing a wave of job losses that economists say could pick up steam in the coming weeks, threatening the broader labor market.

The tally appears to be about several thousand private-sector jobs lost in the past two weeks since federal funding cuts and freezes took hold. More than 7.5 million Americans work in jobs directly connected to the federal government, according to the Brookings Institution, as contractors or grant workers, some of whom are already out of a job. And there are millions more who work in positions indirectly connected to federal funding delays.

So far, the fallout includes rescinded contracting jobs in North Carolina and Austin, Texas. Layoffs at an independent living facility in West Virginia that relies on federal funding to pay staffers, and furloughs of afterschool programs in Maine and community health centers in Virginia facing federal funding delays.

So, all of the disruption going on in Washington, the cuts and some of the freezes in federal budgets starting to have an impact on small businesses and nonprofits. We'll see how things shake out.

The next bit of news comes from BizBuySell. BizBuySell is an acquisition website that helps buyers and sellers buy and sell their businesses. Every month they put out the BizBSell Insight Report, and I wanted to report on this to you because what BizBuySell is reporting is that small business acquisitions grew 5% in 2024. The number of small businesses bought and sold grew 5% over the course of the year – this was last year – according to BizBuySell’s Insight Report. The report tracks and analyzes U.S. businesses for sale transactions and sentiment from business owners, buyers, and brokers.

In addition, despite the Federal Reserve's rate cuts, one broker said that many commercial lenders have kept underwriting criteria tight, resulting in minimal pass-through savings for acquisitions financing, meaning that even though interest rates have been cut a couple of times this year, the criteria for getting financing to buy a business has still been pretty tight in the banking world.

Still, buyers paid higher prices for businesses in 2024, and deals closed faster. BizBuySell reports that the median sale price rose 3% year to year, and the median days on the market dropped a 3% to 168 days – it is the median days that it is on the market once a seller of a business announces a sale.

So, not a bad year in business transactions, but I will tell you this – my thoughts on this – is that we're going to be seeing a lot more business owners selling their businesses over the next year, a few years, five years, seven years. As an aging demographic, we still have favorable capital gains rates. Hopefully, we can get around the interest rate and the financing issues, but we have a whole generation of people – the Millennial generation – that have grown older and experienced and want to be their own bosses, and one great way to do that is by buying a business rather than starting something up from scratch.

So, the numbers were strong last year, but I do expect them to get stronger.

Finally, OpenAI released a new feature that's part of its ChatGPT Pro subscription called Deep Research. Now, before you get excited about it, keep in mind the Pro subscription costs $200 a month per user, so it ain't cheap. But Deep Research has people are jumping up and down with joy about it, particularly academics, because Deep Research itself gives you the ability to do deep research into many academic and other issues that maybe impacting your business, with the results coming back extremely accurate and extremely fast, as well.

Some of the professors and some of the people that do research in organizations that I know that have been using Deep Research by OpenAI are telling me that the results they're getting back have been astounding, and it's cut their time of research significantly. So, it might be worth that extra 200 bucks a month. That's the good news.

The bad news is this. A popular person on X, formerly Twitter – his name is Min Choi. It's @minchoi. I follow him on Twitter. He's great. He covers AI. He used Deep Research and asked it: What 20 jobs will OpenAI and Deep Research replace that humans are doing right now.

And, there is a whole list of them, let me just give you some of them, right? It is thought that AI will replace tax preparation people, data entry clerks, telemarketers, bookkeepers, virtual assistants, proofreaders, copywriters, customer service representatives, social media managers, translators, recruiters, all the way down to travel agents and tutor. If you want to look at the full list, you can go to Min Choi's X account. It's @minchoi. You can see the full list, that was the results he got back when he asked.

So, great news that Deep Research and OpenAI is providing a lot of great information and helping us do the research for our products, in particularly in academia, but bad news for a lot of workers that are out there because Deep Research is itself predicting that these 20 specific jobs, some of them I just mentioned, are not going to be jobs for humans in a short time.

My name is Gene Marks, and you have been watching or listening to this week's edition of the Paychex THRIVE Week in Review. Hope you got some good information from it. If you need some help or tips to run your business, sign up for our Paychex THRIVE newsletter. It's paychex.com/thrive.

Thanks again for joining me this week. I'll be back next week with some news that impacts your business, and a few thoughts on why and how. We'll see you then.

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