We keep celebrating low unemployment—but data shows jobs and economic activity have been shifting to big business

In 2024, small businesses lost jobs for six straight months, seeing only a slight increase in employment in July and flat growth in August. These declining employment numbers reflect the challenging macroeconomic conditions emerging from the COVID-19 pandemic—and cutting interest rates could provide relief. Still, the Index indicates that further and broader action is needed from Washington to ease conditions and support small business creation and expansion.

Research shows that small businesses play an outsized role in driving innovation in the American economy. They also create jobs at faster rates than larger, more established businesses, and despite their small size, account for 77% of all employers in the U.S. At peak employment after the COVID-19 pandemic in Q4 2022, small businesses with one to nine employees employed more than 13.08 million people.

From Q1 2023 to Q4 2023, BLS showed two quarters of decline and two quarters of flat growth. Our Index shows an additional two quarters of decline and one quarter of flat growth from Q1 2024 to Q3 2024. This represents a total decline of 47,200 jobs (-0.36%).

While many have been applauding the employment gains we saw elsewhere in the economy over the past year, small businesses have been struggling to hire and retain workers. Simply put, this means economic activity was shifting from small businesses to larger businesses, and this side of the story hasn’t been told. 

Our economy may see the ripple effects of this shift for decades to come. Tomorrow’s superstars are today’s new startups and struggling small firms. Consider how many of our most successful, well-known businesses were famously launched from garages—and how the entrepreneurs doing the same today face unprecedented challenges compared to their predecessors.

Businesses can grow their revenue without increasing employment, but measuring this growth is challenging due to a lack of high-frequency data. To address this gap, our team has developed a new and unique revenue component to the Index, offering a monthly snapshot of small business revenue to complement the limited official data, which is only available every five years. The Index shows that despite a contraction in employment over the first seven months of this year, average revenues have increased during this time.

Imagine, then, what these businesses could achieve with more favorable macroeconomic conditions. Easier, more affordable access to credit—rather than the costly credit cards that small businesses have been relying on more heavily since the pandemic—could finance the expansion of a brick-and-mortar retail space or investment in new equipment. Owners may be more willing to take a risk once they have set aside more savings. Or an entrepreneur could feel more comfortable spending the upfront capital for tech upgrades that would give them access to artificial intelligence tools, helping them become more efficient and competitive in the long run.

Small businesses have weathered these past few, difficult years. Now it’s time they get a chance to flourish under more favorable conditions. There are many more tailored tools available to policymakers—who recognize both the current importance and future potential of these businesses—and are ready to focus on their unique needs, rather than taking the one-size-fits-all approach that has dominated our economic policy and has favored bigger, more established, and less dynamic businesses.

I hope policymakers use our findings as a starting point to seek out additional data and develop informed, effective, and targeted policies that support our nation’s small businesses.

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