As the U.S. economy continues to grow faster than expected, the gap between large corporations and small businesses is widening rapidly. Small businesses, which are relatively less able to respond to economic changes, are being hit hard by the Donald Trump administration's tariff policy and stepped-up immigration enforcement.
On the 25th, the Wall Street Journal (WSJ) said, "The economic gap between low-income and high-income Americans is widening, and this pattern is clearly emerging among corporations as well," adding, "Small businesses are seeing profitability deteriorate and are moving to cut expenses as years of high inflation, increasingly cautious consumer behavior, and tariff burdens pile up."
Small businesses' expense-cutting moves have led to staff reductions. According to a report by private labor-market researcher ADP, private corporations with fewer than 50 employees have steadily cut hiring over the past six months, and in November alone, small-business jobs fell by about 120,000. That is the biggest drop since March 2023.
By contrast, corporations with 50 or more employees added about 90,000 jobs over the same period. By size, mid-sized corporations with 50–499 employees added about 51,000 jobs, and large corporations with 500 or more employees added about 39,000. Moreover, according to financial data firm LSEG, large listed companies in the S&P 500 saw third-quarter net profit rise 12.9% from a year earlier this year, and large corporations also saw annual revenue improve sharply.
The WSJ noted, "The health of locally based small enterprises is extremely important to the U.S. economy," adding, "Small businesses with 500 or fewer employees employ nearly half of the U.S. workforce and account for more than 40% of gross domestic product (GDP)." That means small businesses' management struggles could have significant negative effects on the U.S. job market and the broader economy.
Factors exacerbating small businesses' difficulties include the Trump administration's tariff policy and inflation. Andrew Chamberlain, chief economist at Gusto, a payroll manager for small and medium-sized businesses, said, "Small retailers in particular are struggling greatly with tariff uncertainty and persistent expense pressures," adding, "Both October and November saw workforce reductions among small and medium-sized businesses, with the retail and professional institutional sector posting the biggest declines."
On the ground, business conditions feel even worse for small businesses. Sydney Rieckhoff, CEO of the popcorn brand "Almost Famous Popcorn," headquartered in Cedar Rapids, Iowa, said, "In a typical year, we would have hired 10–15 people for the holiday peak season, but this year it was only 4–5," adding, "Consumers have become much more cautious in their spending." The company makes about 60% of its annual sales at year-end, so cutting headcount during this period means expected sales are that much lower.
"Total Promotion," headquartered in Las Vegas, also said it is struggling to operate due to tariffs imposed on imported goods needed to manufacture promotional products for small and medium-sized businesses, such as apparel, pens, and bags. Brandon Milson, Total Promotion's chief executive officer (CEO), said, "After receiving tariff bills, some jobs not only failed to generate revenue but even resulted in losses," and ultimately the company laid off one full-time employee due to falling demand and rising expenses.
With inflation dragging on, the business outlook for small businesses is darkening. Zack Negin, CEO of "Tabula Rasa Bar" in Los Angeles, said wine, cheese, and equipment parts became more expensive due to tariffs, while labor costs, rent, and insurance premiums also surged, adding, "In the 10 years I've run this business, I've never been as uncertain about the future as I am now."