Small business employment declines in second quarter of 2024

Small business employment down by 108,600 jobs in Q2-2024

At the end of the second quarter of 2024, US small businesses with 1-9 employees employed 12,691,700 people. This is 108,600 fewer than in Q1-2024, a quarterly decline of 0.85%. After four consecutive quarterly declines, small businesses now employ 357,200 fewer people than in Q2-2023, an annual decline of 2.78%.

Similarly, the latest U.S. Bureau of Labor Statistics (BLS) data for small business employment shows that Q3-2023 had the first quarterly decline since the COVID-19 pandemic (Q3-2023 is the latest quarter for which official statistics are available). This downward trend had been revealed by the Intuit QuickBooks Small Business Index starting in November 2023. The Index’s latest projection now predicts that future BLS updates will show this downward trend continuing through Q2-2024.

Find out which sectors, regions, and states had the largest declines in small business employment from April to June 2024, and which are bucking the trend.

Jump to: Sectors | Regions & states | Analysis by Professor Ufuk Akcigit

Sectors

Leisure & hospitality sector contracts, but retail sector expands

The leisure & hospitality (NAICS 71-72) sector saw the biggest decline in small business employment in Q2-2024, accounting for more than 1 in 7 of all jobs lost (see table below). Small businesses in the sector now employ 1,573,500 people—the lowest number since March 2022. Looking at longer-term trends (see chart below), small business employment in the sector is currently 8.2% below its pre-pandemic growth trajectory, with 130,000 fewer employees at small businesses than if employment had continued growing at that pace.¹

There’s more encouraging news for the retail sector (NAICS 44-45)—another important source of small business jobs. Despite the recent quarterly decline (see table below), small business employment in the sector remains 3.9% above its pre-pandemic growth trend, which is equivalent to an additional 59,000 jobs (see chart above).¹

Regions & states

The Southeast accounts for 1 in 4 of all jobs lost at small businesses but remains above its pre-pandemic growth trend

The Southeast region (Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, West Virginia) had the largest decline in small business employment in Q2-2024, down by 27,000 jobs (see table below). With the largest overall share of small business jobs and second-fastest quarterly rate of decline (0.90%), the region accounted for 1 in 4 of all jobs lost at small businesses throughout the US. Further analysis of the Small Business Index suggests this decline can be attributed to national trends in small business employment within each sector rather than local factors like natural disasters or investments made in the region.² In other words, employment trends in the region are close to the national averages.

Small business employment in the Southeast remains 0.7% above its pre-pandemic growth trend (see chart above).1 This means that, despite the recent decline, the region has created small business jobs at a faster rate since the pandemic than before it—equivalent to 22,000 extra jobs.

Florida performed better than expected despite recent decline

Among the 20 states tracked by the Small Business Index, larger states such as California, Texas, and Florida account for the greatest share of small business job losses in Q2-2024 (see table below). While Florida saw declines both quarterly and annually, further analysis reveals that its annual decline was significantly slower than the national average.² Like the Southeast region as a whole, Florida remains above its pre-pandemic employment growth trend (2.1% above) equivalent to 17,300 additional jobs.¹

Expert analysis 

Professor Ufuk Akcigit explores the trends in more detail.

“During his recent testimony to Congress, Federal Reserve Chair Jerome Powell highlighted that conditions indicate that the labor market is not overheated and there has been a cooling over the past two years. This comes as no surprise to those who have been following the Intuit QuickBooks Small Business Index. The Index, which looks at a sample of anonymized QuickBooks small business payroll customer records, has long indicated a weakening in small business employment.

“In a high inflation and high interest rate environment, small businesses can be disproportionately affected because they have limited internal capital and savings and consequently, are heavily dependent on external financing, particularly from banks. Adverse macroeconomic conditions have severely impacted US small businesses, resulting in negative job growth 70% of the time since the Index was launched in March 2023.

“The Index now reports a 0.85% quarterly decline in small business jobs, marking the sharpest quarterly decline since its inception. This also represents the fourth consecutive quarter of decline, underscoring the challenges some small businesses face in these difficult economic conditions. Despite attempts to sustain operations through credit cards during a period of reduced lending to small businesses, prolonged challenging financing conditions have forced some to lay off workers or shut down.

“Since many larger firms begin as small enterprises, ensuring we have the right policies in place to support small business health during these uncertain times will not only support today's small business employment but also ensure that the US economy does not miss out on its future potential superstar firms.”

Notes

1. “Pre-pandemic growth trend” refers to a small business employment trend line drawn from January 2015 to the beginning of widespread COVID-19 pandemic counter-measures in March 2020, showing the longer-term trend in small business employment growth before the pandemic. Extending this line from April 2020 to June 2024 and comparing it to current employment levels provides a measure of post-pandemic recovery in small business employment. Above the trend line indicates employment has grown faster since the pandemic than before it. Below the trend line indicates employment has grown slower since the pandemic than before it. See line charts for details.
2. Based on an Analysis of Variance (ANOVA) test of the Intuit QuickBooks Small Business Index’s latest quarterly data to identify if local trends reflect what’s happening nationally by sector or not.