Small businesses lead November job losses as tariff uncertainty weighs on hiring

Small businesses lost over 100,000 jobs in November amid economic uncertainty, the latest ADP private sector payrolls report showed.

ADP’s November employment report revealed that private sector firms cut 32,000 jobs in November overall. The decline was led by small businesses, which lost 120,000 jobs in November, while medium businesses (defined as between 50 and 499 employees) added 51,000 jobs and large establishments added 39,000 jobs to offset some of the monthly decline.

ADP chief economist Nela Richardson noted that hiring “has been choppy of late as employers weather cautious consumers and an uncertain macroeconomic environment,” adding that while “November’s slowdown was broad-based, it was led by a pullback among small businesses.”

Small businesses are facing uncertainty over the economy, which has shown signs of a cooling labor market and persistent inflation despite economic growth data remaining resilient amid the AI boom. Unlike larger firms, smaller businesses are particularly sensitive to changing economic trends and policy shifts like higher tariffs.

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“It just seems to be a classic case of the sort of canary in the coal mine scenario,” Sean Higgins, research fellow at the Competitive Enterprise Institute, told FOX Business. “There’s a lot of economic uncertainty right now due to tariffs and other things, and the smaller businesses are having a harder time weathering that, waiting for things to go through.”

“I think a big part of this is the tariff situation. We’ve gone through this year where the rates for various countries keep fluctuating and changing almost on a dime and rapidly. Businesses don’t like tariffs, but they don’t like uncertainty even more, and so they’re trying to figure out what the prices are going to be in the next six months to a year,” he said.

ADP’s report showed declines among both goods-producing and service-providing industries. In the service sector, professional and business services shed 26,000 jobs and information services lost 20,000, while education and healthcare added 33,000.

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Among goods-producing industries, manufacturing firms lost 18,000 jobs and construction 9,000 – while natural resources and mining businesses added 8,000 jobs.

Manufacturers face tariffs through higher costs on intermediate goods that they use to produce finished goods that are either sold in the U.S. or exported to foreign markets.

“The assumption with most tariffs is that it’s finished products, which is what most people think of, and then, therefore, if you’re blocking these finished products from coming into the U.S., then people are going to be buying those products from producers here in the states,” Higgins said. “The problem is that’s not really the case. A lot of times it’s the raw materials coming in and that’s what the manufacturers are using.”

He noted the steel tariffs from the first Trump term as an example, because they boosted employment in steel production roles but had the consequence of hurting employment at other manufacturing facilities that relied on imported steel.

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Peter Hansen, director of research and policy analysis at the National Federation of Independent Businesses (NFIB), told FOX Business that its data contrasts with ADP and suggests that while the labor market has cooled, it remains in positive territory.

Hansen noted that the trade group, which represents small and independent businesses, has seen small businesses that are trying to hire are struggling to find suitable workers. 

He added that uncertainty has created challenges for small businesses throughout the year, with uncertainty spiking around periods of substantial transition like the president’s April tariff announcements.

“It’s not just a business that’s uncertain about its future and then being a little bit hesitant to invest. I think it’s a business selling to people who are a little bit uncertain,” Hansen said.