Paychex’s review of the U.S. economy, focusing on small businesses, showed overall stability, with highlights across geography and industry.
Small businesses are seen as real-time indicators of the U.S. economy. And in 2025, the small business sector was described as stable in one of the largest payroll providers’ datasets in the country.
According to the Paychex Small Business Employment Watch, U.S. small-business job growth showed only minimal month-to-month growth. Paychex’s Small Business Jobs Index averaged 99.67 for the year and ended December at 99.26, pointing to a labor market that held its ground rather than accelerating or slipping into contraction.
At the same time, wage growth continued to moderate—a key theme for the U.S. economy as inflation pressures evolve. Paychex reported hourly earnings growth of 2.71% in December, below 3% for the 17th consecutive month and just under the 2025 average of 2.74%.
In practical terms, payroll costs are rising at a slower pace than in prior periods, which helps consumers with their spending and small businesses, which see better margins.
“The latest read on our data reveals a continued moderation in wage inflation and little change in the rate of job growth among America’s small businesses in 2025,” said John Gibson, Paychex president and CEO, noting that the Midwest and healthcare-related sectors showed strength.
Weekly hours worked showed notable growth closing 2025 up 0.25%, the highest level since May 2021.
Geographic Areas and Sector Breakout
The Midwest ranked as the top region for small business employment growth throughout 2025.
By December, the Midwest tied with the Northeast with a 99.65 jobs index reading.
Regarding state performance, Indiana stood out, with an average index level of 100.52 in 2025 and a high of 101.50. It ranked first for small-business employment growth.
As this occurred at the start and end of the year, it signals sustained expansion in contrast to much of the country.
By industry, Education and Health Services led small business job growth every month in 2025, posting an index of 100.49. The sector has recorded nearly 5 consecutive years of growth, reinforcing healthcare’s role in the U.S. economy.
Overall
Paychex’s data suggest that last year the small business economy showed steady hiring, cooling wage inflation, and stability in key regions and essential service sectors.
For 2026, the question is whether this continues and turns into renewed growth—or continued caution.
Learn more: National Small Business Week Celebrates Small Businesses’ Contribution to the U.S. Economy
