Layoffs are a painful and personal reality for small businesses struggling with rising costs.

As the holiday shopping rush approaches, small American businesses are reducing their workforces. Firms with fewer than 50 employees cut around 120,000 jobs in November, according to ADP payroll data. This decline occurs just before a critical sales period for many of these companies.

ADP's chief economist, Nela Richardson, explained that while the labor market remains strong overall, small businesses are feeling the strain first. Factors such as inflation, unpredictable consumer spending, tariffs, and economic uncertainty are intensifying pressure on smaller companies.

Adjusting Staff Without Layoffs

Some businesses are not laying off employees outright but are limiting new hires or not filling positions when staff leave. Small changes at the edges accumulate over time, said Richardson.

Hanna Scholz, president of Bike Friday, a custom bicycle manufacturer in Eugene, Oregon, has not conducted layoffs. However, her workforce decreased from 24 to 21 this year as employees left for health reasons. She attributes this reduction to softer U.S. consumer demand, though her Asian clientele, who tend to be wealthier, remain steady.

Uncertainty often causes people to delay large purchases, and bicycles arent considered essential, Scholz explained.

Rising Costs and Shrinking Margins

Stuart Leventhal, owner of Down to Earth Living, a furniture and decor store in Pomona, New York, faces a decline in sales as customers spend cautiously, often buying less or delaying purchases. To retain his long-term employees, he has accepted a 10% reduction in profits.

Additionally, new tariffs on imported goods have increased costs, forcing businesses to absorb expenses rather than passing them to consumers. We cant handle much more than what were already absorbing, Leventhal said.

On the West Coast, Lacie Carroll-Marsh of Malicious Women, a craft candle company in Snohomish, Washington, has experienced soaring costs for imported packaging due to a 20% tariff from Taiwan. Soy wax prices have risen nearly 12% because of labor shortages on domestic farms caused by deportations and the departure of immigrant workers.

Emotional Toll of Layoffs

Carroll-Marsh has laid off 17 of her 31 employees this year. Many of her staff have been with her for years, making the decisions emotionally painful. We know each others families. It hurts deeply, she said. Wage and health insurance commitments remain high, with monthly contributions per employee set to nearly double in the coming year. If sales do not recover, additional layoffs may be necessary.

Political Disputes Over Responsibility

As small businesses struggle, political groups are pointing fingers. The Main Street Alliance blames federal policies, including trade wars and healthcare reductions, for small business hardships. The Trump administration contends that the difficulties are temporary and emphasizes tax cuts and deregulation as support for small enterprises.

Commerce Secretary Howard Lutnick dismissed tariffs as a primary factor for reduced payrolls, citing temporary disruptions such as government shutdowns and workforce changes. He expects job numbers for small businesses to recover in the coming months.

Author: Aiden Foster