# The State of HR Featuring Economic Data + Insights for 2023 > A NachoTuesday interview — the C-Suite Insights series from NachoNacho, the B2B SaaS and AI > marketplace. In conversation with Liz Wilke, Principal Economist, Gusto. - **Page:** https://nachonacho.com/nachotuesday/video/The-State-of-HR-Featuring-Economic-Data-Insights-for-2023 - **Guest:** Liz Wilke, Principal Economist, Gusto - **Guest on LinkedIn:** https://www.linkedin.com/in/lizwilke/ - **Recorded:** 2023-09-12 - **Watch:** https://www.youtube.com/watch?v=tazxbVDGafI ## Summary In this NachoTuesday Andy Karuza interviews Liz Wilke, Principal Economist at Gusto. In this interview, they discussed the state of the economy + how it impacts founders from the Human Resource perspective. This interview goes in depth exploring economic data from the national and local level and how it affects your business as well as tips for Founders to attract and retain the best talent based on collective data and research from across the industry. ## Full transcript Good afternoon everyone, and welcome to another Nacho Tuesday. Today, I have Liz—how do you say it? Is it Wilke? Liz: Wilke. Yes, perfect! I'm getting good at this stuff. We have Liz Wilke from Gusto, and she's their Principal Economist. Could you explain what that role entails? Liz: Sure. I'm the Principal Economist at Gusto. Gusto has a data and economics research team that we started about three years ago. I've been with them for about two years. My job is essentially to take all the data on our platform about Gusto’s small business customers, which range up to hundreds of employees, and then use that data to conduct original research about small businesses. This helps people understand what's going on with this crucial segment of the economy and assists small businesses in navigating current challenges. I aim to help founders understand how the world is changing and what they can do to be more successful in these topsy-turvy times. Interviewer: I read about it every day. So, what got you into this path? What led you to this role? Liz: Honestly, before joining Gusto, I was at LinkedIn, working on the economic graph team. I was drawn to the idea of taking company data and turning it into useful insights. Researchers and academics do valuable work, but we can access granular, real-time data that others might not have. There’s something really cool about that. When Gusto reached out, looking for someone to discuss the small business economy, hiring trends, and pandemic-related topics, I was excited. It felt like a perfect fit, and I think I have one of the coolest jobs ever. I love helping people understand the small business sector and the broader economic landscape. Interviewer: You recently published some economic research called "The Economy Explained," which aims to distill complex concepts for the average business owner. What were some key insights and findings from this research? Liz: We've been doing "The Economy Explained" for almost a year now, starting late last year during a period of high inflation and an exceptionally tight job market. Small businesses and their service providers, like accountants and HR professionals, were coming to us with questions about the economy. They needed insights that were accessible, not just for economists or Wall Street investors. So, we created "The Economy Explained" to bridge that gap. Each quarter, we provide insights on what the data means for small businesses. For this quarter, we found that while the talent market remains tight, it’s beginning to loosen. Interest rates are high, creating a credit crunch for businesses. We advise businesses to manage their capital carefully, preserve cash flow, and prepare for potential cash shortfalls. Additionally, we’re guiding businesses on pricing strategies and value, especially for direct-to-consumer companies, as consumers become more cautious with their spending. Interviewer: I like that because many people only understand the economy from a macro level—they read headlines but don’t grasp the underlying details. It’s great that you’re breaking it down and offering specific insights for actionable strategies. You mentioned raising money in the current high-interest environment. Given how expensive it is to secure funds, what alternative approaches might businesses consider? Liz: With interest rates so high, traditional fundraising channels are becoming more costly. Businesses might need to explore alternative means of raising money, such as seeking venture capital, exploring grant opportunities, or looking into alternative financing options. It’s crucial for businesses to be creative and strategic in their approach to funding in these challenging times. (05:39) I’d like to plug one of our partners, Lighter Capital. They help fund businesses with low-interest loans based on actual revenue. So, there are other options out there, but these macroeconomic conditions are really affecting small businesses. As you mentioned, what other steps can small business owners take to ensure they’re hiring the right talent right now, given these tech trends? Should they consider raising money now, or possibly wait a few months? (06:10) Let’s start with the talent aspect. Anyone who was in business last year is probably still trying to catch up and figure out what happened. Tech companies, in particular, can breathe a little easier now because they’ve really slowed down their hiring. They’re not letting go of people at much higher levels than other companies, but they’ve significantly reduced their hiring. The whole sector was shaken up by the big layoffs earlier this year, and many tech entrepreneurs are saying, “Let’s take a beat. If someone leaves, let’s not fill that role just yet. Let’s wait and see what happens.” A lot of this cautious approach is showing up in our data. The good news is that with fewer openings, tech companies have a higher probability of finding the right fit for new roles. They can take their time and be very intentional about their hiring decisions, which is crucial for startups where having the right team members can make a big difference. (07:08) On the flip side, tech entrepreneurs can take their time to find the right people and the right fit in this talent market. Given that hiring is slowing down, there are more candidates available, and companies can be more deliberate in their selection process. In terms of capital and runway, I advise preserving capital. Don’t hire someone unless you’re really sure they’re right for the role and can help drive the business. Even when seeking venture capital or other funds, it’s important to focus on proving out your business concept and achieving solid revenue numbers. Traditional banks are tightening their standards for loans and limiting the amount of credit available, so obtaining financing is becoming more challenging. Entrepreneurs should concentrate on revenue outcomes and maximizing those in the short term to reduce the need for credit and make it easier to secure financing when needed. (08:31) Yes, it’s a good wake-up call for many businesses. Being frugal is a valuable lesson, even though macro conditions can force this mindset. On the flip side, there is a lot of great talent available right now due to layoffs. This presents a great opportunity for startups and small businesses to bring experienced individuals onto their teams. (09:22) Do you see any differences on the local or regional level, such as between hot tech markets like San Francisco, New York, and Seattle, versus up-and-coming areas like Austin? (09:55) It’s actually a lot more regional than industrial. The Southeast, for example, is doing quite well in terms of hiring and economic resilience. There aren’t as many strictly tech companies in the Southeast, but the line between tech companies and modern companies using tech tools is increasingly blurred. The Southeast’s economy has been resilient and is outpacing concerns about a downturn or soft landing. San Francisco, on the other hand, is experiencing a bit of a depression in hiring. The big tech hubs like San Francisco and Seattle are seeing slower hiring, while New York is doing just fine overall. We’re seeing a sustained depression in hiring in some areas, but the tech landscape has expanded significantly. With the rise of remote and hybrid work, many new companies are either fully remote or hybrid, making the distinction between tech hubs and where tech employment can happen increasingly fuzzy. (11:20) That’s a great point. We’re finding a lot of great talent in the Midwest and other places too. Many people realize they don’t have to live in high-cost areas like New York City and can work from more affordable locations. What are your thoughts on the commercial real estate space and how the rise of hybrid or remote work affects it? (11:48) Thank you for such a lovely question. It’s a big question, but first, I want to say that New York and other high-rent places often get criticized for their costs. It’s true that there’s a lot of great talent to be found elsewhere, but I personally enjoy New York. The real promise of remote and hybrid work is that you can live in a place you love and still connect to your job. In terms of commercial real estate, there are significant impacts. For entrepreneurs and small business startups, the focus should be on what will happen to community and regional banks as these trends evolve. (12:46) As commercial real estate churns through its cycles, there are some important factors to consider. For those listeners who might not be familiar, commercial real estate mortgages typically have a term of seven years, unlike residential mortgages which are often 30 years. After this period, there is a large balloon payment due. Mortgages for commercial real estate financed back in 2015, 2016, and 2017, when occupancy rates were high and interest rates were low, are now coming due. These big balloon payments usually get refinanced, but with current interest rates at around 8% and occupancy rates down by 20 to 30 percent, refinancing is becoming problematic. This situation raises concerns about some commercial real estate holders potentially defaulting, similar to the “jingle mail” scenario from 2008, where people returned the keys to their homes. Community and regional banks, which hold more commercial real estate on their balance sheets compared to larger banks, may struggle to address these challenges. This raises questions about the future of small and regional banking, which many small businesses rely on for financing. (14:11) You mentioned consumer spending and credit card debt. Should small businesses be concerned about a potential slowdown in consumer spending as we move toward the end of the year? I believe consumer spending will indeed slow down, but there isn’t a strong signal indicating a significant drop-off. Consumers have been defying expectations for the past 18 months, despite economists predicting a decline in spending. Consumers continue to spend confidently, supported by savings accumulated during the pandemic. While credit card debt is increasing, delinquencies have not spiked significantly. Consumers are managing to pay off their credit card debt despite higher usage, so there’s no strong indication of a drastic decrease in spending. However, we might see consumers becoming more cautious, which is why we advise direct-to-consumer businesses to focus on value pricing—providing good value for the money spent. (15:33) Businesses also need to consider the implications of price changes. Once you increase prices, it’s challenging to revert to lower prices, which can affect your reputation. Frequent price adjustments can lead customers to expect discounts and undermine your regular pricing strategy. Therefore, businesses should carefully weigh whether they can weather the storm or if it’s time to raise prices and stick to them. (16:23) We previously discussed how building a team can make or break a company. Given the shift toward remote work, what are some areas to look for talent beyond traditional tech hubs like San Francisco or New York? Remote work has significantly broadened the field for finding talent. Many startups formed since the pandemic are either fully remote or hybrid. Fewer than half of the companies that were fully in-person before the pandemic remain so. Most businesses that are remote feel no constraint to their local community and can hire from anywhere. Companies that were born remote can start from scratch with remote work processes. International hiring has become a natural extension of this trend. Many businesses, particularly tech companies, are hiring international contractors or employees. They find international workers cost-effective and skilled, and they have been pleased with this approach. (18:20) Since remote work and international hiring have become more common, what kind of perks and benefits are trending now? The days of enticing employees with perks like ping-pong tables are probably behind us. Remote work and high flexibility regarding work hours and days are highly valuable benefits. An analysis we conducted last year showed that the retention benefit of remote work is equivalent to about $11,000 in additional annual pay. This flexibility is especially beneficial for employees who need to balance caregiving or other personal projects. Offering flexible work arrangements doesn’t cost businesses much but is a significant benefit to workers. Additionally, 401(k) plans are a cost-effective benefit that employees value highly. Although not all businesses offer it, it provides a substantial return on investment and helps employees build their financial future. (20:15) I’m a big fan of flexible work arrangements myself. People have various personal commitments, and flexibility can make a significant difference. For instance, some people need to attend to family responsibilities like taking kids to activities. As long as employees get their work done and are effective, flexibility can improve productivity. It allows individuals to work during their most productive hours, whether that’s early in the morning or late at night. (21:07) Flexibility in remote work can lead to more effective work because it accommodates different work styles and schedules. However, it’s essential to manage remote work intentionally. Companies that are successful with remote or hybrid work often have strong documentation processes and actively build community and connection. It’s crucial to ensure that remote workers have clear guidance on their tasks and feel appreciated. Building this sense of community requires intentional effort, as it doesn’t happen naturally like it does in an office setting. (22:57) Yeah, that's a great point. Process is everything. To your point, great documentation and onboarding are crucial for new employees. It's important to introduce them to new colleagues and those who have been with the company for a while. Setting up individual meetings helps them build rapport and working relationships. There’s nothing worse than being thrown into the deep end without knowing how to swim. Therefore, the onboarding process is key and can make or break the remote or hybrid work culture. (23:24) Onboarding is a critical period where face-to-face interaction can be particularly valuable. It allows new employees to learn the company culture, ask questions, and build relationships, which smooths the transition. Even remote and hybrid companies that have a strong experience still find it important to create face-to-face time during onboarding to ensure a smooth integration. (23:52) Have you seen any particular tools that people like to use to ensure great communication, organization, and file management among team members? I think the choice of tool matters less than whether everyone knows which tool to use and how to use it effectively. We’re actually developing a new program with NachoNacho called Mavens, which is designed for implementation specialists who help companies onboard tools like Notion and other complex products. I personally use Gusto, which is known for its intuitive interface and ease of onboarding. It’s worth noting that Gusto invests heavily in creating a user-friendly experience. (24:46) Not to overly promote Gusto, but its seamless and human-friendly user interface makes onboarding smooth, especially for small business owners. Good onboarding helps to remove friction and ensures that employees are set up for success. (25:14) For founders navigating remote and hybrid work, what tips would you offer to ensure high performance from team members, especially beyond the initial months? One key factor is the frequency of check-ins and communication. In an in-person setting, managers might have weekly or biweekly check-ins with direct reports. However, remote companies often find that more frequent check-ins—at least once or twice a week—are more effective. This helps with consistent re-baselining, goal confirmation, and ensuring that employees feel connected and clear about their roles. Although it can impact productivity, it’s crucial for maintaining alignment and engagement. (26:11) Another important aspect is intentional community building. Bringing people on-site or scheduling specific social engagements helps reinforce connections as employees move beyond the onboarding phase. Regular expressions of gratitude and appreciation can be as effective as in-person meetings in maintaining morale. High-performing remote companies excel in balancing these elements and ensuring that small gestures of appreciation contribute to a strong team culture. (27:09) Celebrating small wins is crucial. Achieving large goals can be disheartening if not broken down into manageable steps. Recognizing and celebrating small milestones, such as acquiring a new customer or acknowledging a team member’s contributions during weekly stand-ups, can motivate everyone and maintain momentum. (28:01) For startups, where environments are fluid and frequent changes are common, establishing a strong culture is akin to core training for athletes. It helps teams stay agile and effectively handle challenges. Building a robust culture is essential for long-term success, especially when navigating the ups and downs of startup life. (28:30) If founders want more data and insights, they can Google "Gusto data and research" or visit gusto.com. There’s also a link to research on the Gusto website, where they can find information on hiring, termination, and pay rates by industry and region, updated monthly. Additionally, the Gustanomics podcast and LinkedIn are good resources for further insights. (29:19) Thank you, Liz, for joining us today and providing such insightful information. I also appreciate everyone who joined the webinar. If you're interested in diving deeper into economic data, feel free to reach out to Liz or explore the insights available. Understanding macro conditions and listening to experts can help you make informed decisions for your business. Once again, thank you, Liz, and I highly recommend checking out Gusto. For SaaS needs, NachoNacho is a great marketplace, and Gusto is a valued partner there. Thanks again, and have a great day! --- All NachoTuesday interviews: https://nachonacho.com/nachotuesday About NachoNacho: https://nachonacho.com/llms.txt