Hourly earnings growth for employees at small businesses slowed this month to its lowest level since May 2021, according to a report Tuesday from payroll company Paychex, while hiring growth remained consistent with recent months.

The Paychex Small Business Employment Watch, which tracks U.S. businesses with fewer than 50 employees, found that hourly earnings growth for small business workers slowed to 2.82%, the lowest percentage in four years.

“Hourly earnings just continues to slow,” said Frank Fiorille, vice president of risk, compliance and data analytics at Paychex. 

He noted that consumer confidence is also down, according to another report released Tuesday from the Conference Board that found its Consumer Confidence Index fell by 7.9 points in April to 86.0, the lowest level since May 2020. “We’re not seeing any recession data yet, but clearly there’s been a slowdown in the labor market,” said Fiorille.

Job growth ticked up slightly in April, gaining 0.27 percentage points to reach an index level of 100.02 on the Small Business Jobs Index component of the Paychex report. The index has averaged 99.99 over the past 12 months. Weekly hours worked growth (-0.17%) remained negative in April despite one-month annualized growth of 2.62%.

All four regional jobs indexes improved this month, led by a 0.81 percentage-point gain in the Midwest, which remains the top region for small business job growth for the 11th month in a row.

Ohio spiked 2.24 percentage points to an index level of 101.94 in April, ranking in first place among the states for the first time since Paychex began reporting in 2014, thanks to significant job growth gains in the trade, transportation and utilities sectors.

Minneapolis also reported strong job gains again in April, reaching an index level of 102.35,  and topped the state rankings for the second month in a row.

The professional and business services sector gained 0.82 percentage points to reach a jobs index level of 100.36, marking the best one-month gain among industry sectors in April.

Fiorille hasn’t yet seen an impact from the Trump administration’s ramped up tariffs and deportations on small business payrolls, but has heard some anecdotal stories from clients.

“You’re definitely hearing a lot of stories about that, but we’re not really seeing that yet in the data,” he said. “That might be something that takes a little bit of time to work through when we might see that.”

He advises accountants to keep an eye on developments in Washington regarding tax and tariff policy as the tax reconciliation bill makes its way through Congress. 

“Businesses are kind of frozen right now,” said Fiorille. “They’re waiting to see what happens with policy, and then they’ll take action. They’re holding onto employees, maybe not firing or laying them off and maybe doing things like reducing hours, or not hiring temp help or staffing firms.”

Treasury Secretary Scott Bessent set a July 4 goal to pass President Donald Trump’s multitrillion-dollar tax cut package as polling shows that voters largely disapprove of the White House’s handling of the economy.

“We hope that we can have this tax portion done by the Fourth of July,” Bessent said Monday following a meeting with congressional leaders.

The Treasury secretary and National Economic Director Kevin Hassett met with Senate Majority Leader John Thune, House Speaker Mike Johnson and the two tax committee chairmen, Senator Mike Crapo and Representative Jason Smith. Congress returned to Washington on Monday following a two-week break, and the tax bill is the party’s top legislative priority.

Trump has put increasing pressure on Republicans to pass the measure, going so far as to tell Michigan’s Republican lawmakers to stay in Washington rather than join him for a speech Tuesday in the state marking his first 100 days in office. Trump and Johnson also met earlier Monday.

Thune on Monday evening called the Independence Day deadline “aspirational” and said he wasn’t making any commitments regarding timing. He added that he was more concerned about when the debt limit expires later this year. “That is a hard deadline for us,” Thune said.

Bessent’s July 4 timeline puts additional pressure on Republicans to approve a tax bill. Johnson has set an end-of-May goal for the House to pass legislation that includes a renewal of Trump’s first-term cuts and a fresh round of levy reductions, partly paid for by curbing federal spending. 

“I believe we can pass it by Memorial Day,” Johnson said Monday evening. He said that Congress could “save Medicaid,” the health care program for the poor and disabled, but that “we have to find the requisite number of savings.” 

The Senate isn’t likely to complete work on the measure for months, with party leaders in that chamber having set their sights on a vote by August. Trump’s first-term tax cuts don’t expire until the end of the year. 

The push on taxes follows a series of polls that show Americans souring on the president’s handling of pocketbook issues. A CNN poll released Sunday showed that just 39% of Americans approve of how Trump has steered the economy, the lowest of his two terms in the White House. An NBC News poll showed tariffs Trump imposed are also deeply unpopular.

Hassett downplayed the notion that the measure could include a tax increase for millionaires, an idea that had been discussed in some Republican circles. Trump said he loves the concept, but worries about the political ramifications.

Hassett, in response to a question about whether a millionaire tax increase could be included in the bill, said “the president has said it is not.”

Earlier this month, Republicans passed a budget resolution that would allow them to fast-track the tax bill through Congress without needing to make any concessions to attract Democratic votes. 

Republicans have already put forward some of the easier pieces of the eventual package, including a $150 billion boost to defense spending and new cuts to federal worker pensions. But GOP lawmakers have yet to make significant progress on the specifics of the legislation, including which tax priorities to include and which health care spending to cut.

Hassett told Fox Business last week that he and Bessent will present a “list of the president’s top priorities to make sure they make it into the bill” during Monday’s meeting. 

Earlier Monday, Bessent touted some campaign proposals from Trump specifically calling out “no tax on tips, no tax on Social Security, no tax on overtime and making auto loans deductible.”

After the Treasury secretary met with GOP congressional leaders, he added that he expects the package will have a new tax benefit to write off the cost of building factories in the U.S.

Bessent said tax revenue is up compared to last year, a possible sign that the government won’t hit the legal debt limit until later than anticipated. He said an official estimate of the debt ceiling default date would come later in the week or next week.

The Congressional Budget Office last month had forecast the federal government would likely run out of enough money to pay all its bills by August or September if lawmakers fail to raise or suspend the debt limit. It has said the date could be as soon as May if revenues came up short.

It wasn’t that long ago that tax professionals were wringing their hands over a hypothetical future where an army of robots mercilessly sent thousands of accountants to the unemployment line. That was back in 2016, and now, almost a decade later, the majority of tax professionals have done an about-face on AI and are ready to embrace it as a vital business resource.

According to a new report conducted by Thomson Reuters, there has been a seismic shift in attitudes toward generative AI among tax and accounting professionals. Nearly three-quarters (71%) now believe the technology should be applied to their daily work, up from 52% in 2024. 

What’s more, the percentage of tax firms already implementing gen AI technology has nearly tripled year-over-year, jumping from 8% in 2024 to 21% in 2025.

Gradual acceptance

The trend is a transformation in how professionals view AI technology, both internally and from a client perspective. Overall, 13% of firms indicate that gen AI is already central to their organization’s workflow, and 32% are expecting full integration within one year. A staggering 79% of tax and accounting firms expect significant gen AI integration by 2027, making the accounting profession one of the fastest-growing industries for gen AI acceptance in the professional services sector.

It’s clear that initial skepticism has rapidly given way to the recognition of gen AI’s potential to enhance productivity and client service delivery. That’s largely due to a number of market factors. For starters, early movers on the technology have already started to find their job roles have been optimized, not replaced. Meanwhile, firms that aren’t making use of gen AI for their tax and accounting work are increasingly being perceived by clients as behind their peers in terms of efficiency.

In fact, more than any other industry, clients want to work with firms that they perceive to be harnessing cutting-edge technology to improve their tax processes. Overall, 77% of clients from corporate businesses are looking to the tax firms working for them to use gen AI. Additionally, 14% have also instructed tax firms to use gen AI in their official tendering document compared to 8% of those who have instructed law firms to do the same.

Job security concerns fade

This huge uptick in adoption is largely due to tax professionals’ fading concerns about their job security. Of the firms using gen AI in their work, almost half (44%) are using the tools either multiple times a day, or daily, the most common uses being tax research (77%), tax return preparation (63%) and tax advisory (62%).

While it may have been trendy to predict a dystopian landscape, pragmatists realized years ago what tax professionals now understand: Artificial intelligence is a powerful augment, not a suitable replacement, for human ingenuity. Now, only 9% of tax, accounting and audit professionals view gen AI as a threat to industry jobs. A majority (54%) see minimal or no threat to employment.

The undefined future

While it certainly seems on the surface that the tax landscape has only been enhanced by the emergence of AI, organizations need to be prepared for the unexpected.  According to a recent Brookings report, tax preparers will be among the jobs most exposed to AI. While the report does not specify whether AI will aid workers or replace them, it does note that the technology is rapidly transforming several industries, which could affect many types of jobs in the future. Meanwhile, Thomson Reuters research shows 70% of tax firms say they have no formal policies governing gen AI use, which presents potential risks as implementation accelerates.

So, for all the justifiable excitement over the prospects of less stressful tax seasons and time saved, tax professionals still need to treat AI like a work in progress. Without question, the days of fear and doomsday prophecies are in the past, and organizations are now embracing the transformative journey of AI integration. As AI continues to evolve, it has the potential to revolutionize tax and accounting practices. Firms that can remain fluid and nimble in their approach will not only find the easiest path forward, but will reap the rewards: cue increased efficiency, reduced human error, enhanced client service, and the ability for professionals to focus on higher-value strategic work.