Small Businesses Drive Half of Recent Job Growth Amid Rising Costs and Record Startup Activity
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Small businesses with fewer than 250 employees created half of all new jobs in the last five years, even as they face rising costs and economic uncertainty. Americans are filing paperwork to start new businesses at near-record rates, averaging 470,000 applications per month in 2025. However, small business profitability fell by 1.3% in April, its largest decline in two years.
Facts First
- Small businesses created 50% of all new jobs over the last five years.
- Americans are filing new business applications at near-record rates, averaging 470,000 per month in 2025.
- Small business profitability fell 1.3% in April, marking its largest decline in two years.
- Small businesses spent 31% more on gasoline in April compared to the previous year.
- The average price of gas was $4.53 on Tuesday, a 43% increase from the previous year.
What Happened
A report from the Bank of America (BofA) Institute states that businesses with fewer than 250 workers created 50% of all new jobs over the last five years. During the same period, small business profitability fell by 1.3% in April, its largest decline in two years. The report also notes that entrepreneurs are facing concerns regarding labor availability, inflation, and economic outlook uncertainty. Meanwhile, Americans are filing paperwork to start new businesses at near-record rates, averaging 470,000 applications per month in 2025, which is approximately 66% above pre-pandemic norms.
Why this Matters to You
If you are looking for a job, the continued strength of small business hiring may provide opportunities, though labor availability concerns could make some positions harder to fill. Higher gas prices, which reached an average of $4.53 on Tuesday, directly impact your commuting and shipping costs, and small businesses are passing on some of their own 31% higher fuel spending, which could lead to higher prices for goods and services. The surge in new business applications suggests a resilient entrepreneurial spirit that may lead to more local services and innovation in your community.
What's Next
The BofA Institute report indicates that small business owners will likely continue to navigate challenges related to inflation and economic uncertainty. The high rate of new business formations may lead to increased competition and job creation in the coming months, though the recent decline in profitability suggests the operating environment could remain difficult. Future reports will show whether the record startup activity translates into sustained job growth and business success.