As the charts below show, this was the third consecutive year of declining annual employment and the fourth consecutive year of declining real annual revenue. Most of the 2025 decline in employment occurred in the third and fourth quarters. Get a deeper dive into the latest quarterly trends here. 

The latest data from the Small Business Index shows US businesses with 1-9 employees now employ 12,923,600 people, with average real annual revenue of approximately $604,540 per business, which is equivalent to approximately $794,660 in 2025 dollars, after inflation is added. 

Economic analysis

"Some firms are cutting payrolls and real sales are drifting lower, with the leisure and hospitality sector taking the sharpest hit and the West Coast feeling it most," said Ufuk Akcigit, Professor of Economics at the University of Chicago. "That’s the other side of 2025’s ‘soft landing.’ GDP was still running hot mid‑year and inflation cooled to 2.7%, but by year‑end, the labor market had clearly lost altitude.

"In 2025, jobs growth slowed noticeably compared to 2024 and unemployment was 4.4% in December. Yet, banks were still reporting tighter standards for business loans in late 2025, according to the Federal Reserve’s Senior Loan Officer Opinion Survey, which is the pressure point small businesses feel first and longest. The Fed’s late‑year rate cuts may help, just not fast enough to prevent the squeeze.

"The message is clear: keep small business credit channels functioning. Treat this broad retrenchment as an early warning sign because once it feeds into local hiring and spending, it is more challenging to reverse."

Official statistics

Growth in the education and health services and construction sectors (noted above) is reflected in the latest available official statistics for each sector. Data from the U.S. Bureau of Economic Analysis (via Federal Reserve Economic Data, or FRED) shows quarterly growth of 1.8% in education and health services output in Q2-2025—up from 1.3% in Q1-2025.

Similarly, FRED data shows accelerated growth in the construction sector’s seasonally-adjusted real quarterly gross domestic product (GDP) in Q2-2025. Likewise, seasonally-adjusted data from the U.S. Bureau of Labor Statistics shows annual employment growth of more than 1% for the sector as a whole in 2025, with 88,000 jobs created. 

Seasonally- and inflation-adjusted growth data for 2025 isn’t currently available for the professional and business services or leisure and hospitality sectors (the two sectors with the largest declines in small business employment in 2025). This data is available, however, for the accommodation and food services industry, which is a segment of leisure and hospitality. This shows positive growth in Q2-2025 but a quarterly decline of approximately 2.4% in Q1-2025.

Survey insights 

Data collected in recent surveys of US businesses with up to 100 employees (commissioned by Intuit every 3 months) reflects the challenges of lower revenues observed in the Small Business Index in 2025. Asked where they need the most help over the next 3 months, the top response throughout 2025 was “a successful marketing/advertising campaign” to boost demand. Similarly, the top investment priority for respondents in 2025 was “new sales or marketing investments or campaigns to boost revenue.”

Turning to employment, the survey indicates small and medium-sized businesses found it easier to hire and retain skilled workers in 2025 compared to previous years. Both indicators have shown marked improvements since April 2025, which may reflect a softening jobs market.

Another priority is productivity (defined as “higher output for the same or lower input costs”), with respondents increasingly reporting that AI is making their work more productive. In October 2025, 74% of respondents reported using AI regularly—up from 48% in July 2024. Among them, 78% said AI is boosting productivity. The top reported uses of AI are marketing, customer service, and data processing, with generative AI being the most popular application. Roughly 1 in 10 reported using agentic AI.

Dive deeper into small business employment and revenue trends for 2025

Sector trends

Despite the overall decline in small business employment observed by the Small Business Index in 2025, six sectors had net gains in employment last year. As noted above, the fastest growing sectors were education and health services and construction.

Education and health services had annual growth of 1.53%, adding 39,800 jobs. Construction had annual growth of 1.52%, adding 12,700 jobs. Both sectors maintained long-term annual growth trends in 2025—the fourth consecutive year of growth for education and health services and the tenth for construction. Additionally, education and health services was the only sector with average real annual revenue growth at small businesses in 2025. 

Three sectors, however, show large declines in small business employment in 2025: the professional and business services sector (NAICS 54-56), the leisure and hospitality sector (NAICS 71-72), and the manufacturing sector (NAICS 31-33)—see the table and charts below for details. Notably, 2025 was the second largest annual decline observed since 2015 for the professional and business services sector and the leisure and hospitality sector.

Regional trends

Regionally, 2025 was a mixed year for small business employment, with five regions showing declines but three showing growth. The Great Lakes region (Illinois, Indiana, Michigan, Ohio, Wisconsin) had the fastest annual growth overall (0.23%), adding 4,400 jobs. At the other end, the three regions with the largest annual declines in small business employment were the Southwest (Arizona, New Mexico, Oklahoma, Texas), the Far West (Alaska, California, Hawaii, Nevada, Oregon, Washington), and the Southeast (Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, West Virginia). Average real annual revenue for small businesses was down in all eight US regions. See the table and charts below for details.

State trends

Reflecting the regional employment trends, 2025 was a mixed year for the 20 states tracked by the Index. Eight states show growth but the other 12 show declines. New York had the fastest annual growth (1.56%) and the largest annual increase (12,500 jobs). At the other end, Texas had the fastest decline (-1.67%) and the largest decrease (-19,600 jobs). All 20 states show declining average annual real revenue at small businesses. See the table and charts below for details.