US small business hiring set to hit lowest since May 2020

US small business hiring is expected to fall to its lowest level since May 2020, a threshold that carries significant weight given that period marked the deepest shock of the pandemic-era labor market collapse. The anticipated drop signals that smaller employers — historically the first to pull back when credit conditions tighten or demand softens — are now doing exactly that.

Why it matters

Small businesses account for roughly half of all private-sector employment in the United States. When hiring at this segment contracts to multi-year lows, it typically precedes broader labor market softening by one to two quarters. The May 2020 comparison is particularly stark: that was the floor of pandemic-driven hiring freezes, not a normal cyclical trough. Revisiting that level under non-crisis macroeconomic conditions would be an unusually bearish signal for employment momentum heading into the second half of 2025.

Market impact

Weak small business hiring data tends to reinforce expectations for Fed rate cuts, as it adds to evidence that restrictive monetary policy is filtering through to the real economy. For crypto and risk assets, the read is mixed: near-term, deteriorating labor data can weigh on risk appetite; medium-term, a pivot narrative gains traction. Traders should watch the next NFIB Small Business Optimism print and the monthly jobs report for confirmation of the trend.