The first several months of the year have delivered a whirlwind of economic news. While the economy is holding steady, small business owners are facing tough planning decisions in the face of shifting policy. But while uncertainty is rising, the overall economy is stable. Here are a few things that small business owners should know about what’s going on with the economy:  

• Economic data has continued to show a solid economy, but planning has been harder for small businesses. Strong job growth and consumer spending are keeping the economy on track, but changing policies have made it tough to plan ahead.
• Wage pressure is easing. With pay growth slowing, small businesses may be able to use some open cash for other financial priorities.
• Changing tariff policies are causing ripple effects. While top tariff rates have been revised down since changes were originally announced, uncertainty remains about their final outcome. Small businesses should use this time to build resiliency.

The economic foundation of the economy is solid, but changing policies have made planning difficult 

Let’s start with the good news. The broader economy remains in a solid place:

• Unemployment is low at 4.2%. The labor market continues to add jobs steadily.
• Consumer spending rose 1.8% in the first quarter. That’s a bit slower than the previous quarter, but still a healthy pace.
• Wage growth has cooled to 3.5% year over year. That may relieve some pressure on your payroll costs.

Most small businesses are continuing day-to-day operations without major disruption.

But business sentiment is falling. Optimism has declined in recent months, and uncertainty is now at a five-year high. Many business owners are unsure how to plan beyond the next 60 days. That’s mostly due to unpredictable tariff policy, but also concerns about borrowing costs and future customer demand.

Small business owners who are seeking to gain security should consider evaluating their business plans and talking with their accountant about cash flow analyses. Last month, Gusto published a guide on building a resilient business. Tools in this guide can help you prepare your business for the future.

Small businesses are still hiring—but more cautiously

Hiring activity among small businesses looks a lot like it did last year. According to Gusto data, net hiring through early May is in line with 2023 and 2024. That means many businesses are holding steady. They’re not scaling up or down dramatically.

While these national trends provide context, your individual business sector may experience these forces differently. In April 2025 Transportation and utilities had 3.6 openings per unemployed worker and the wholesale trade sector had 2.4.This spike is tied to businesses increasing inventory ahead of tariff changes in the first quarter. Those in import-heavy industries rushed to bring in goods early—and hired to make that happen. In fact, preliminary data show imports jumped 41% in Q1 compared to the end of 2024.

Even outside those sectors, many employers are choosing to hold onto staff. If your business was around in 2022, you may remember how hard it was to find talent. Across the board, hiring and quitting have slowed, and many owners are choosing stability over risk.

Slower wage growth is bringing some relief

Hiring is just one part of the labor cost equation. The other is pay and here, there’s good news.

Wage growth has continued to slow this quarter. In fact, it’s now lower than it was before the pandemic. For many small businesses, that’s welcome news. This may be an ideal time to review your compensation strategy and ensure it remains competitive while sustainable.

Lower wage growth makes your labor costs more predictable. If you’re experiencing this, you should consider how you can use that freed up cash for other priorities. During the Federal Reserve’s most recent policy meeting it kept its interest rate at 4.5%. With borrowing costs still high, many businesses are hesitant to take on new debt, which makes internal cash flow more important than ever.

While wage growth is slowing, it’s still above the inflation rate. This means that the average small business owner is experiencing relief on wages, but the average worker is able to maintain their purchasing power. This is an economic sweet spot that can continue to support the U.S. economy.

Tariffs continue to drive uncertainty

Tariffs are now one of the biggest sources of planning difficulty for small businesses. Even though some of the highest rates have been paused, tariff rules are still shifting and that makes planning tough.

Many businesses can’t confidently forecast their costs just 90 days out. That’s already affecting business decisions:

• Importers are front-loading inventory
• Others are revisiting pricing, supply chains, and margins

Whether or not your business relies on imports, these ripple effects matter. Costs, timelines, and customer expectations can all shift quickly. It’s a good idea to assess your exposure and plan for different scenarios.

To help, Gusto has created a resource hub for small business owners, which includes:

• A plain-English guide to what tariffs are and how they work
• A link to the Harmonized Tariff Schedule (updated in real time)
• A directory of funding and grants by state

What you can do now

You can’t control economic policy, but you can plan for how it affects your business. Here are three ways to prepare:

1. Focus on process and efficiency

With turnover slowing and labor costs easing, now’s a good time to fine-tune operations. Revisit workflows, budgets, and team roles so you’re ready to grow when the time is right.

2. Build flexibility into your financial plans

Use scenario planning to model how your business might respond to shifts in customer demand, interest rates, or supply costs. Think through how changes in one part of your business could affect the rest.

3. Stay informed on tariff developments

Use our tariff resource hub, which includes tools you can use and share with your team. It’s one of the best ways to stay current as policy evolves.