Paychex: U.S. small business jobs flat in 2025, wage growth stays below 3%

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U.S. small businesses experienced a year of stability in both hiring and wage growth in 2025, according to the Paychex Small Business Employment Watch, signaling a continued cooling of labor market pressures after several volatile years. 

The monthly report, which analyzes payroll data from Paychex clients with fewer than 50 employees, found that the national Small Business Jobs Index averaged 99.67 in 2025, showing minimal fluctuation throughout the year. The index ended December at 99.26, reflecting largely flat employment growth among small firms nationwide. 

At the same time, wage growth continued to moderate. Hourly earnings growth closed the year at 2.71%, remaining below three percent for the 17th consecutive month. The 2025 average hourly earnings growth rate was 2.74%, reinforcing signs that wage inflation has eased from the sharp increases seen earlier in the post-pandemic recovery. 

“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, adding that certain regions like the Midwest and sectors such as healthcare demonstrated strength throughout the year. 

While small business employment growth remained steady, Paychex noted stronger momentum among larger employers toward the end of the year. Job growth among Paychex customers with more than 50 employees accelerated in the closing months of 2025, resulting in flat employment levels across the broader client base. 

One notable area of improvement was hours worked. Weekly hours worked growth rose 0.25% by year-end, the highest level recorded since May 2021. The increase suggests employers may be relying more on existing workers rather than expanding headcount amid ongoing economic uncertainty. 

Regionally, the Midwest outperformed other parts of the country for small business employment growth throughout 2025. Although the region tied with the Northeast in December with a jobs index of 99.65, it maintained the top regional ranking on an annual basis. 

Indiana emerged as the strongest-performing state for small business employment growth. The state averaged an index level of 100.52 in 2025 and ranked first both at the beginning and end of the year, finishing December at 101.50. 

By industry, Education and Health Services continued to lead small business job growth nationwide. The sector averaged an index level of 100.49 in 2025 and posted positive growth in every month of the year. Paychex data show the sector has maintained a growth streak for nearly five consecutive years. 

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