Small business hiring is set to be flat rather than falling in 2026. In the Federal Reserve Banks' 2025 Small Business Credit Survey, 36 percent of small employer firms expected employment to increase over the next 12 months, 51 percent expected no change, and 13 percent expected a decrease.
How many small businesses plan to hire in 2026?
About one in three. Asked about the next 12 months, 36 percent of small employer firms expected employment to increase, 51 percent expected no change, and 13 percent expected a decrease. The question was put to 6,421 firms with 1 to 499 employees in a survey fielded from September 3 to November 14, 2025.
The headline is the size of the flat middle. A narrow majority of American small employers are planning to hold headcount exactly where it is, which is a different signal from either expansion or retrenchment. It usually means owners intend to absorb additional work through existing staff, hours, or tooling rather than adding payroll.
It is also worth noting what firms expect on the revenue side over the same window: 56 percent expected revenue to increase. More firms expect to grow sales than expect to grow headcount, which is the arithmetic of doing more with the same team.
Is small business hiring slowing down?
Yes, gradually and for a fourth consecutive year. The survey's employment growth expectations index, the share of firms expecting to add staff minus the share expecting to cut, fell to 23 in the 2025 survey, its lowest reading since the 2020 survey.
| Survey year | Employment expectations index |
|---|---|
| 2018 | 38 |
| 2019 | 38 |
| 2020 | 16 |
| 2021 | 31 |
| 2022 | 27 |
| 2023 | 28 |
| 2024 | 26 |
| 2025 | 23 |
Read the shape rather than any single step. The index has drifted down from 31 in 2021 to 23 in 2025 without a sharp break, and it remains well above the 16 recorded in 2020. This looks like a slow cooling in hiring appetite, not a contraction.
Why hiring is still hard even when firms want to hire
Because finding and keeping people remains one of the two biggest operational problems small firms report. 46 percent of firms named hiring or retaining qualified staff as an operational challenge in the prior 12 months, second only to reaching customers and growing sales at 57 percent, and well ahead of supply chain issues at 30 percent and utilising technology at 29 percent.
Cost is the pressure sitting underneath it. 73 percent of firms cited increased costs of goods, services, or wages as a financial challenge, and wages sit inside that line. When wage costs are rising and revenue expectations are softening, the rational move for many owners is to hold headcount and pay more to keep the people they already have, which is consistent with a 51 percent flat share.
The practical consequence is that a hiring plan in 2026 is really a retention plan plus a cash flow plan. The offer has to clear the market, and payroll has to clear every pay period regardless of when customers pay you.
How hiring plans connect to working capital
Payroll is the least forgiving expense a small business has. New hires cost money before they generate any, and the gap between paying a person and seeing the revenue they help produce is usually measured in months. That gap is a working capital problem rather than a profitability problem, and it is why otherwise healthy firms delay hires they can genuinely afford.
Uneven cash flow was named as a financial challenge by 50 percent of firms, and paying operating expenses, a category that explicitly includes payroll, by 54 percent. If your constraint is timing rather than margin, a revolving facility such as a business line of credit generally fits better than a lump sum, because you draw only when the gap opens.
The Broker Shop is a funding broker, not a lender. One 2-minute application is matched to the lenders in our network of 50+ whose guidelines your business meets, so you can see what a payroll cushion would actually cost before you commit to a hire. It is free to apply, and checking your options won't affect your credit score. See also our small business employment statistics and the wider cash flow data.
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One 2-minute application is matched to the funders whose guidelines you meet. It's free, and checking your options won't affect your credit score.
See What I Qualify For →The bottom line: Small business hiring in 2026 is defined by a flat middle rather than a downturn, with a narrow majority of owners planning to hold headcount while they absorb rising costs.
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