Ks on Main Street

Happy New Year! Today is the first business day of 2026, so let’s spend some time talking about businesses. Last year was a strong one for some of the most noteworthy companies. Rising revenues coupled with improved productivity helped usher in large gains in profitability. This was mostly true for America’s largest firms.  Lesser-known enterprises did not fare as well.  Not unlike the composition of consumers, the business world is shaped like a “K.”

November data from the payroll provider ADP show companies with fewer than 50 employees cut 120,000 jobs in the penultimate month of 2025.  Such firms are facing challenges similar to those felt by households: rising healthcare costs, pricing impacts from tariffs, and cautious consumers. These firms on Main Street, USA are weathering such conditions without the economies of scale enjoyed by their larger counterparts.

It seems unlikely that a flip of the calendar will not be enough to disassemble the K.  Instead, the immediate path ahead is likely to have more of the same.  Larger firms have a greater chance of enhancing productivity while smaller firms may need to resort to increased prices to help offset their input-cost challenges.  In November, 34% of small businesses surveyed by the National Federation of Independent Business raised prices. With tariffs, healthcare costs, and softer demand squeezing margins, small businesses may stay cautious on hiring and investment until policy or cost conditions ease, reinforcing the divergence between the upper and lower “arms” of the K in America’s business landscape.