Bank of America reports small business hiring down 6.7% year-over-year amid tariff surge

The Bank of America Institute reported that the firm’s data signaled a slowdown in hiring by small businesses as tariff payments by firms that import goods have surged.

The report found that small businesses’ payments to hiring firms fell for the third straight month in July, according to Bank of America’s proprietary small business data. The firm’s data showed that hiring was down 6.7% year-over-year on a three-month moving average, with July marking the third straight month of declines.

Taylor Bowley, an economist with the Bank of America Institute, told FOX Business in an interview that comes as a reversal from the start of the year and coincides with small business clients that make direct payments to customs seeing those expenses rise by nearly 170% from the start of this year amid the Trump administration’s higher tariffs.

“We’re starting to see construction and manufacturing hiring payments ramp up, whereas other sectors like retail and services have fallen off,” Bowley said. 

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Bowley noted that small business profitability growth has remained positive, it has started to decelerate and added that while consumer spending growth has increased, it’s unclear at this time whether it’s because consumers are buying more or if they’re facing higher prices due to tariff price hikes on those goods.

She also said that the National Federation of Independent Businesses (NFIB) reported in a recent survey that the share of small business owners reporting poor sales as their top business problem reached the highest level since February 2021.

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Bowley said that tariffs and the uncertainty facing businesses as they weigh their hiring decisions are leading to increased hiring in some sectors, though the higher costs from tariffs hit small businesses which are less able to shift their supply chains or handle the financial burden.

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“We’re also seeing a bit of a restriction in terms of the supply of workers which is leading to labor shortages,” Bowley said, noting that trend is playing out in Bank of America’s small business payroll payments growth. 

“You’re seeing sectors like construction, restaurants, lodging – payroll payment growth has increased since the start of the year, but this runs counter to what we’re seeing in overall wage growth, where it’s actually come down a little bit.”

Bowley noted instances of larger publicly-traded companies that have said tariffs are leading to price hikes on certain products in quarterly earnings calls, adding that small businesses have less leeway to change their sourcing or absorb tariffs in their profit margins.

“When we think about small businesses that can’t, for instance, switch a supply chain as easily as it might be for larger corporations, it’s unsurprising to me that we’re starting to see profitability come down, because small businesses are just going to face more pressure on that front because they operate on thinner profit margins,” she said.