Small businesses are putting the brakes on hiring plans.
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The Trump administration said tariffs would bring jobs back to America, especially for small businesses. Maybe that’ll happen someday. For now, however, they’ve mostly brought confusion and slowed hiring on Main Street.
That’s according to the May jobs report from the National Federation of Independent Business, a small business advocacy group. The report is based on a random sample of 485 NFIB member firms surveyed throughout the month.
The findings show a labor market that’s softening. Just 34% of small businesses said they had unfilled job openings. That’s down from nearly 50% two years ago, but unchanged since April–President Trump first unveiled his “Liberation Day” tariffs on April 2, marking the start of what has been two months of confusion, with Trump delaying some levies, imposing others, and making additional threats. More worrisome is that small businesses aren’t planning to hire much either. Just 12% of owners said they anticipate creating new jobs in the next three months, a level which NFIB says is “in weak territory compared to recent history.”
Seven of the nine industries NFIB tracks saw year-over-year declines in the share of firms with job openings. Construction fell to 48% from 54%. Transportation dropped to 43% from 52%. Professional services saw the sharpest decline, from 47% last May to just 18% today, the lowest of any sector. Retail and agriculture were the only categories to buck the trend, rising by 1 and 2 percentage points, respectively. The slight gain in agriculture may reflect hiring pressure from the administration’s immigration crackdown.
That weakening in labor demand has started to show up elsewhere. Just 16% of small business owners cited labor quality as their biggest problem, down 3 points from April and the lowest since April 2020. NFIB suggested that recent Department of Government Efficiency (DOGE) cuts to the federal workforce may be boosting the labor pool. With more applicants, fewer firms feel compelled to offer raises. Only 26% of businesses reported raising wages in May, down 7 points from April and the weakest reading in more than four years. NFIB concluded that labor cost pressure “is easing,” which may help contain inflation.
But the bigger picture is more worrying. Tariff threats are holding back hiring. That hasn’t caused major problems yet, but September looms. That’s when laid-off federal workers will stop getting paid. If tariffs are still unresolved by then, small business hiring may continue to sag. And if that happens, the unemployment rate, which has held near 4% for a year, could finally break higher.
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