U.S. small businesses slow hiring amid economic uncertainty

WASHINGTON, UNITED STATES — Small businesses across the United States are holding off on hiring as economic uncertainty, rising costs, and policy changes weigh on their operations, according to a report from The Washington Post. 

These firms, which employ more than 40 percent of the nation’s workforce, are feeling the pinch acutely, prompting cautious staffing decisions that ripple through local economies.

Economic pressures and policy uncertainty

Cyndi Gave, who runs The Metiss Group in North Carolina, experienced nearly three decades without layoffs—until August, when she had to let go of three employees, including a “superstar” office manager, because clients were slowing hiring. 

“I was beginning to think it was just us,” Gave said, describing how her small-business clients, mostly firms with fewer than 250 employees, were also pulling back on spending.

Experts point to multiple stressors facing small businesses. 

KPMG chief economist Diane Swonk said, “Small businesses play an outsize role in the economy, and they are more vulnerable to what the larger economy is going through.”

“All the datasets are pointing the same way as far as lower momentum and small businesses doing more with less,” she added. 

Former U.S. Labor Department Chief Economist Harry Holzer noted that uncertainty is hindering economic expansion.

“That does add up to a picture of companies that don’t want to contract, but they don’t want to expand either,” Holzer said. 

Data confirms the trend, as the Bank of America Institute reported a 7 percent drop in small-business hiring in September compared to the 2024 average, while ADP noted that small and mid-sized firms shed 31,000 jobs in October, even as larger companies added 73,000.

Consumer behavior and trade challenges

Consumer caution is also affecting small businesses. David Lokker of Landsharks in Michigan said, “We’re not selling prescription meds. … Nobody needs their fifth Patagonia jacket. … We’re just not seeing as many consumers right now.” 

Similarly, Paloma Clothing in Portland has seen a decline in customers and an increase in returns as shoppers closely monitor their spending.

Trade policies have added additional pressure on operations. David Reed of Maxant Metals in Florida explained that tariffs on aluminum and machinery have forced him to take on more of the work personally and have reduced his opportunities to expand the business.

He added, “Our employees are our lifeblood basically and if we have to lay some of them off it is really cutting meat out of our business.”

Outsourcing as a strategic option

For small businesses navigating these challenges, outsourcing or offshoring certain operations can offer flexibility and cost savings. 

By delegating non-core tasks to specialized providers abroad, small firms can maintain efficiency without increasing headcount. 

Strategic outsourcing can buffer firms against labor market uncertainty, allowing them to focus on growth opportunities while controlling payroll costs—an increasingly attractive solution in today’s volatile economic environment.