There are 34m small businesses in the United States. They employ approximately half of the country’s workers and generate about half of the country’s GDP. They’re an important voting block. So how are they feeling about the economy as we head into November’s midterm elections? Overall, economic sentiment for Donald Trump is poor but small business – admittedly a diverse demographic that’s hard to poll – seems fairly confident. A number of recently published surveys and reports can help understand their mood.
Confidence is generally stable.
This week, the National Federation of Independent Businesses said that its Small Business Optimism Index fell to just below its long-term average, while uncertainty rose slightly. Labor quality was the top concern for 26% of owners and inflation for 20%. Expansion plans weakened, though 17% still plan to add jobs during the next three months.
However, small-business confidence improved significantly in the third quarter, according to the recently published Justworks/US Chamber Small Business Index. Some 72% of the 750 small businesses surveyed say they are comfortable with their current cash flow, but only 27% believe the US economy is in good health. Inflation remains the biggest problem, cited by 54% of owners.
Hiring is not strong, but not weak either.
HR platform Gusto estimated that small businesses added 28,000 jobs in September, making it the eighth consecutive month of employment gains following a decline in January. According to the company’s data, hiring accelerated from August’s revised gain of 18,500 jobs and growth was broad across industries, regions and company sizes, with healthcare and social assistance among the strongest sectors. Particularly notable is that some of the smallest employers continue to participate in the expansion, rather than job growth being concentrated solely among larger companies.
In its latest Small Business Employment Watch report, Paychex, another large HR and payroll processing service (and a client of my company), said that hiring in September essentially matched its 2026 year-to-date average with overall employment among companies with fewer than 50 employees appearing “stable”.
ADP, the country’s largest HR and payroll processing service, reported that US private employers added 90,000 jobs in September, with hiring accelerating for the first time since May following three months of slowing growth. Education and healthcare and leisure and hospitality led the gains, while financial activities and professional and business services were weaker. Importantly for small businesses, establishments employing one to 19 workers added 18,000 jobs. According to ADP, private-sector employers have not shifted into recession mode and although hiring has cooled from earlier periods, businesses are still adding employees.
Intuit painted a slightly different jobs picture. Its Intuit QuickBooks Small Business Index, which is based on data it gathers from its millions of QuickBooks customers, found that employment at US businesses with one to nine employees fell by 7,000 jobs in September and that jobs declined across most sectors and regions.
Revenues remain solid.
Intuit’s QuickBooks data shows that revenues moved sharply up this past month as inflation-adjusted average monthly revenue increased 1.68% and growth occurring in 11 of 12 industries, every region and 19 of 20 states.
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Fiserv, a payment-processing service, said that its September data showed improving sales among US small businesses. However, the company reports that consumer behavior remains selective and that traffic has been weaker even as customers spend more when they do shop.
Economic growth continued in the third quarter.
Overall, US manufacturing remained firmly in expansion territory in September. The Institute for Supply Management’s Manufacturing Purchasing Manager’s Index marked its ninth consecutive month of growth after years of contraction. Despite rising prices, new orders, production and employment all remained expansionary and order backlogs increased. As usual, the ISM reported yet another month of expansion in the service sector (it’s been 27 consecutive months) with new orders remaining “particularly strong”.
The Wall Street Journal and other media sources reported recently that first-quarter annualized growth was revised to 2.5% from 2.1%, and second-quarter growth was increased to 2.2% from 1.5%, which, its editors argued, shows that the “US economy is performing considerably better than pessimistic headlines imply”.
Philadelphia lags in business creation.
My business is based in Philadelphia, a heavily Democratic area in a swing state. My clients appear to mostly be doing well so far this year but, like most small businesses around the country, continue to struggle navigating higher costs and a tight labor market.
This anecdotal evidence is somewhat supported by a May survey by WSFS Bank that found “surprisingly strong confidence among Philadelphia-area businesses” despite inflation and economic uncertainty. In that study, 92% of owners and business decision-makers say their companies are meeting or exceeding expectations, while 66% anticipate growth during the next year.
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Philadelphia, however, has its own unique problems, particularly adding fewer small businesses per capita than other large cities. A recent study from Pew Research found that the number of Black-, Hispanic- and female-owned small businesses increased 39% between 2012 and 2022, showing meaningful entrepreneurial growth, but barriers including access to capital, regulatory requirements, taxes, commercial space and the difficulty of scaling companies continued to restrain business formation in the city.
The Democratic strategist James Carville once said that when it comes to electing candidates, “it’s the economy, stupid”. The good news for the Republicans is that the economy is resilient and the overall mood of the country’s small businesses is generally optimistic, despite the many challenges they face. But will that overcome the president’s low approval ratings?
