Small Businesses Are Hiring More, Losing Fewer Workers, & Growing More Nervous All at Once
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In the first week of January, weekly job gains were running at just 4,250. By mid-February, they’d climbed to around 15,250. By late March, they’d reached 39,250, a nearly tenfold increase over a single quarter. That’s not a blip. That’s a consistent, sustained acceleration in private hiring that carries real meaning for anyone planning headcount decisions right now. These figures are preliminary, produced by ADP Research in collaboration with the Stanford Digital Economy Lab, and carry a two-week lag. They’re subject to revision when the next update releases on April 21, but the direction is clear.
The engine behind that momentum is smaller than most people assume. According to ADP Research’s analysis also released today, small employers (those with fewer than 50 workers) drove nearly all private-sector U.S. job gains in both February and March. Small businesses are leading the hiring recovery, and they’re doing it while simultaneously holding onto their existing workers at the tightest rate in nearly a decade.
Small employer turnover fell to 3.9% in March, the lowest in the nine years ADP has tracked the metric. For context, overall private employer turnover has held steady at roughly 4.7% (about one departure per 20 workers) for the past three years. The drop at small employers is a meaningful departure from that baseline. As Nela Richardson, Ph.D., Chief Economist of ADP Research, put it, small employers are signaling workforce stability in a market defined by caution and uncertainty.
That stability cuts both ways. In the short term, low turnover keeps consumer spending intact; employed workers with paychecks are still spending money on Main Street. Over time, though, Richardson flags real risks: when turnover stays this low, entry-level opportunities dry up, wage growth slows because workers aren’t switching jobs to get raises, and the broader dynamism that drives productivity starts to erode. We’ve been tracking the narrowing job-switching wage premium for months, and this data adds another layer to that picture. If you’re actively looking for work and finding fewer openings than you expected, this is part of the reason.
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Small Business Confidence Fell Below Its Historical Average for the First Time Since April 2025
The hiring momentum from ADP sits in direct tension with what the NFIB’s March Small Business Optimism Index reported this morning. The index dropped 3.0 points to 95.8, falling below its 52-year historical average of 98 for the first time since April 2025. The Uncertainty Index jumped 4 points to 92, well above its historical average of 68.
The steepest drop came from profit trends, which plunged 11 points to a net negative 25%. Expectations for business conditions fell 7 points to a net 11%, the lowest since October 2024 and the third consecutive monthly decline. Capital spending plans hit their lowest level since November 2009. NFIB Chief Economist Bill Dunkelberg pointed directly to oil prices as the catalyst: “The dramatic spike in oil prices has spooked consumers and owners alike. Small business owners are having to absorb those higher input costs and pass them along to their customers.”
The labor market data within the report deserves a close read. The NFIB Small Business Employment Index fell 1.9 points to 101.6, a meaningful pullback, though it remains above the 2025 average of 101.2 and the long-run average of 100. Thirty-two percent of owners reported job openings they couldn’t fill in March, still well above the historical average of 24%. And 45% of those actively hiring say they found few or no qualified applicants. The talent shortage hasn’t resolved; it’s just getting harder to address as input costs rise and profit margins shrink.
Compensation plans are also softening. A net 18% of owners plan to raise wages in the next three months, down 4 points from February and the lowest reading since July 2025. That’s a signal worth watching. Small businesses want to compete for talent, but the math is getting harder when oil prices are up, sales are flat (nominal sales declined 6 points from February), and margins are under pressure. If you’re looking to fill open roles in this environment, the competition for qualified candidates hasn’t eased, but employers’ willingness to pay up for talent is starting to.
Frequently Asked Questions
The NER Pulse is a weekly estimate of private-sector job creation based on a four-week moving average of ADP payroll data, released every Tuesday. The monthly ADP National Employment Report covers a specific reference week and is broader in scope. The Pulse figures are preliminary and subject to revision.
ADP Research’s Nela Richardson attributes it to broad economic uncertainty (inflation, geopolitical pressure, and cautious consumer sentiment), making both workers and employers more conservative. Workers stay put rather than risk a move; small employers hold tightly to people they’ve already trained. March’s 3.9% rate is the lowest in nine years of ADP tracking.
Yes. NFIB’s March survey found 32% of small business owners had openings they couldn’t fill (well above the historical average of 24%), and 45% of those hiring reported finding few or no qualified applicants. Labor quality ranked as the second-biggest concern among small business owners nationally.
Falling confidence typically precedes pullbacks in hiring plans and wage offers. With profit margins under pressure and input costs rising, small business owners are getting more selective, and planned compensation increases just hit their lowest reading since July 2025. The openings exist, but targeted applications matter more than volume right now.
