Main Street Couldn't Hire. Now It Won't.
I didn’t want to believe it at first. Main Street barely hires anymore. Net hiring is down 76% compared to 2019. September added just 27,878 jobs.
I don’t argue with the numbers. They came from my former employer, gusto. As a payroll provider, they have data on over 500,000 small businesses. But there had to be an explanation that didn’t make this such a bleak picture. After all, I spoke with these people. Every day I heard from people innovating their businesses through COVID in ways that kept their doors open and served their community. One arcade vendor turned his shop into an afterschool center. Instead of quarters, kids had to read 10 pages and give an overview before playing games. His arcade was packed with kids. An open economy was theirs to take.
Maybe that’s what happened. Main Street over-hired. No need to eat when you’re stuffed. If this were the case, hiring would return to normal on its own. Hangovers end.
That’s not what happened. Using 2019 as a baseline, almost all industries saw hiring below 2019 levels from 2020 to 2022, even counting the rehiring after the COVID layoffs. That’s despite new hire pay up over 10% year over year in 2022. Main Street was offering, but employees weren’t buying. Smaller firms appear to have lost talent to the bigger guys, who could pay larger checks. In mid-2021, nearly half of small business owners had jobs they couldn’t fill.
You can’t have a hangover without binging first. Main Street never got back to baseline. There goes my theory.
In 2021, Main Street couldn’t hire. Now Main Street just won’t hire. This spring, the share of small business owners planning to add jobs fell to its lowest since May 2020. My guess is it’s a cocktail of tariffs, AI, and high interest rates. What the data does show is that even those lucky enough to get hired are hurt by a cooling job market.
If you already have a job, your employer won’t reduce your pay because tariffs raised her operating costs. But for a new hire? Absolutely. The ratio of new hire pay to current employees’ pay is down to 64% from 74% in 2019. Employers have the negotiating power, not employees. It could be that these hires are just more junior. But college grads are the ones getting shut out. If anything, that should push new hire pay up, not down.
This is expected. When hiring slows, new hire pay follows. Excluding COVID, new hire pay growth moves a quarter of a percentage point when net hiring jumps 10k month over month, even after accounting for inflation. Like most things in our economy, it happens with a lag. By my estimate, Main Street would need to roughly triple its hiring to get new-hire raises back to pre-pandemic levels.
Main Street hires when Main Street sells. Buy local. And if you have a job, don’t quit until the next one is lined up.
About the data: Figures come from Gusto’s small-business jobs data (businesses with 1–49 employees, seasonally adjusted). The over-hiring comparison uses 2019 as a baseline against March 2020–December 2022 and January 2024–September 2026. The new-hire pay estimate comes from my regression of monthly changes in new-hire pay growth on lagged changes in net hiring and inflation. Analysis is my own; gusto isn’t responsible for it.
