Main Street bust threatens the entire economy
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Illustration: Lindsey Bailey/Axios
Economic pain is mounting quickly for America's small businesses, raising the chances of a Main Street recession despite an AI-powered growth boom.
The big picture: The economic fortunes of mom-and-pop businesses are diverging from their larger counterparts. The dynamic is not new, but the divide is getting bigger, faster.
- It exposes a vulnerability for President Trump's economic agenda, which top officials have said is focused on reigniting Main Street businesses.
By the numbers: The private sector shed 32,000 jobs in November, according to payroll processor ADP. Small firms — those with fewer than 50 employees — accounted for the entirety of the losses.
- Those businesses reported a net loss of 120,000 jobs, the most small businesses have cut since the onset of the pandemic. Larger businesses grew, but not enough to offset the cuts elsewhere.
- The hiring gap that Axios reported last month is getting worse, though this is the freshest sign yet that small business firings are holding down jobs growth across the economy.
The intrigue: More small businesses are filing for bankruptcy under a special federal program this year than at any point in its six-year history.
- Subchapter V filings, which allow firms to shed debt faster and cheaper, are up 8% from last year, Bloomberg reported, citing data from Epiq Bankruptcy Analytics.
- Chapter 11 filings — a process used by larger businesses — are up roughly 1% over the same time frame.
What they're saying: "Small firms are the leading indicator what's going on nationally and right now they're signaling weakness," says ADP chief economist Nela Richardson.
- "It's evident that medium and large firms are better positioned to weather what's going on," Richardson adds.
Between the lines: Larger businesses have been able to adapt to a tough economic backdrop — historic tariffs, high interest rates and a more cautious consumer — in ways far more challenging for small companies with fewer resources.
- "They can set prices, they can change suppliers," Richardson says. "They can hire contractors instead of permanent employees in a more sophisticated way. They can hire globally, not just in their local region. They have more tools in the toolbox," she adds.
The other side: The Trump administration shrugged off the ADP data that indicated a hiring bust. Commerce Secretary Howard Lutnick told CNBC that the cuts were due to factors unrelated to tariffs, like immigration crackdowns.
- But ADP had earlier told reporters that small businesses generally had less demand for workers, not that staff weren't available for hire.
The bottom line: Main Street is bearing the brunt of an economic slowdown in ways that might make it even harder for small shops to compete with corporate giants.
- "I don't think it's something that quickly resolves itself, not just because of the consumer but also the other macro factors that these small businesses are operating under," Richardson says.
