New York Fed EHIs Reveal Small Business Struggles

Will Aarons and Asani Sarkar

The New York Fed’s Economic Heterogeneity Indicators (EHIs) aim to study macroeconomic outcomes experienced by various groups of people and businesses. We recently added a suite of indicators describing the performance of small businesses to the EHIs—both for the region (defined, for the purpose of this study, as New York, New Jersey, and Connecticut) and nationally. Small businesses are critical to employment generation as they accounted for almost 63 percent of new private sector jobs since 2005 and employed almost 46 percent of all U.S. workers in 2025. Thus, understanding economic trends and impacts for small businesses is important for designing effective monetary policy and aligns with the New York Fed’s mission to support the regional economy. In this post, we highlight some aspects of small business profitability, revenues, employment, and indebtedness since 2019 for firms of different sizes.  

What is New and Relevant About Small Business Indicators? 

The small business EHIs leverage data from the Small Business Credit Survey (SBCS), an annual survey of business owners with fewer than 500 employees by the twelve Federal Reserve Banks. We focus on employer firms—that is, firms with at least one employee other than the owner. In addition to performance indicators for small businesses nationally (also provided in the SBCS 2025 report), we show how these indicators vary by firm size. In particular, we find that firms with fewer than ten employees (about two-thirds of all firms in our sample, on average) face more difficulties in responding to economic and technological challenges. We further report performance indicators for small businesses in the region and show how they have lagged relative to their national counterparts.   

Profitability, Revenues, and Costs 

Not surprisingly, small business profitability fell sharply during the COVID-19 pandemic in 2020 as 46 percentage points more firms reported they were running losses rather than making a profit. By the end of 2023, profitability had recovered partially, with 11 percentage points more firms reporting profits instead of losses. Smaller shares of firms in the region were profitable than firms nationally, with just 6 percentage points more firms reporting profits instead of losses at the end of 2023.

The recovery in revenue growth following the pandemic has been slower and less sustained than the recovery in profits, with the net share of firms reporting higher revenues remaining well below the level in 2019. This is particularly so for firms in the region, with a larger share of these firms reporting lower rather than higher revenues in every year since 2020. Firms with fewer than ten employees have struggled the most, and, in 2024, more respondents from these firms reported lower rather than higher revenues for the first time since the pandemic (see chart below). Across size groups, lower shares of firms raised prices while higher shares reported weaker sales in 2024, although these changes were small. Nevertheless, revenue expectations for 2025 remained stable for firms nationally, but larger shares of firms in the region expected revenues to decline relative to 2024.

Recovery in Revenue Growth Since the Pandemic Has Been Sluggish

Consistent with declining inflation, fewer firms in the national sample reported higher input and wage costs as a financial challenge in recent years. But, bucking the national trend, regional firms with fewer than ten employees reported higher input and wage costs as a financial challenge in 2024. 

Employment

Similar to revenue growth, employment growth exhibited a gradual but weak recovery from the pandemic, especially for smaller firms. As with Tri-State firms in general, small businesses in the region have struggled even more than firms nationally to generate employment since the pandemic. Indeed, each year since 2020, with the exception of 2023, more firms in the region reported negative employment growth than positive employment growth. Those with fewer than ten employees had the least employment growth (see chart below), and a higher share of these firms downsized and had hiring difficulties in 2024 than in 2023. Even among firms with ten or more employees, lower shares expected higher employment in 2025 nationally and in the region, relative to the previous year.

Growth in Employment Has Been Weak for Smaller Firms

Indebtedness 

In the national sample, debt (defined as the mid-point of the range reported by respondents) per employee declined in 2024, especially for firms with fewer than ten employees. Indebtedness could decrease either due to lower demand for credit or constrained supply of credit. Consistent with a supply effect, higher shares of firms received less than the full amount of credit that they applied for while a lower share of firms reported that they did not apply because they did not need funds. Contrary to national trends, debt per employee for regional firms increased in 2024.

Technology and Supply Chain

In 2024, more firms (especially those with fewer than ten employees) reported difficulties with utilizing technology such as cybersecurity, e‑commerce, and social media. In the region, more firms of all sizes reported difficulties with utilizing technology, mirroring national trends. The share of firms reporting supply chain difficulties has declined substantially since 2021, both for the national and regional samples.

Summing Up

Using annual survey data, we report on national and regional trends in small business performance from 2019 to 2024. We find only partial recovery from the pandemic in profitability, and growth in revenues and employment, with worse performance for smaller firms and firms in the region. These trends in employment and revenue growth continued in 2025 for small businesses with 1 to 9 employees, as reported by Intuit’s Small Business Index using data for almost 475,000 firms that run payroll with QuickBooks. Our findings emphasize the increasing fragility of the very smallest firms when responding to economic and technological challenges.

Asani Sarkar is a financial research advisor in the Federal Reserve Bank of New York’s Research and Statistics Group.

Will Aarons is a research analyst in the Federal Reserve Bank of New York’s Research and Statistics Group.

 @article{
        AaronsSarkar2026,
        author={Aarons, Will and Sarkar, Asani},
        title={New York Fed EHIs Reveal Small Business Struggles},
        journal={Liberty Street Economics},
        note={Liberty Street Economics Blog},
        number={February 3},
        year={2026},
        url={https://doi.org/10.59576/lse.20260203b}
    }

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