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Will Aarons and Asani Sarkar We recently updated the suite of indicators describing the performance of small businesses in the Second District (defined, for the purpose of this study, as New York, New Jersey, and Connecticut) and nationally with data from the 2025 edition of the Small Business Credit Survey (SBCS). In this post, we find that regional small businesses reported severe declines in employment and revenue growth in 2025 and became more pessimistic about growth in 2026. In contrast, small firms in the rest of the nation enjoyed stable revenues and employment in 2025 and, while they also had lower expectations of future growth, the decline was smaller in magnitude. Given the importance of small businesses in employment generation, analyzing such data helps to inform the design of effective monetary policy and to understand trends in the regional economy. What Is New and Relevant About Small Business Indicators? The New York Fed small business indicators leverage data from the Small Business Credit Survey (SBCS), an annual survey of business owners with fewer than 500 employees by the twelve Federal Reserve Banks. We focus on employer firms—that is, firms with at least one employee other than the owner. In addition to reviewing performance indicators for small businesses nationally (also provided in the SBCS 2026 report ), we show how these indicators vary by firm size and compare indicators for small businesses in the Second District with their national counterparts. Profitability, Revenues, and Costs Revenue performance in 2025 was worse for regional firms as compared to national firms. Relative to 2024, revenues in 2025 were similar for national firms but worsened by more than 8 percentage points for regional firms. Moreover, lower revenues in 2025 were driven by the smallest firms (with fewer than ten employees) nationally but by firms of all sizes regionally. Revenue expectations for 2026 were notably pessimistic (see chart below). Revenue expectations for all size groups declined by 6 percentage points year-over-year for national firms, and an astounding 20 to 30 percentage points for regional firms. These numbers are the worst recorded in the survey since 2020 both at the national and regional levels. Expected Change in Revenues for 2026 Declined Sharply for Regional Small Businesses Profitability numbers in the survey are more backward looking, as they are a snapshot of conditions in December 2024. National firms reported profits 13 percentage points more often than losses while regional firms did so 8 percentage points more often. Thus, in contrast to revenues, profitability increased for firms of all sizes, perhaps reflecting better conditions for small businesses in 2024 than 2025. Despite the improvements, profitability remains far below the pre-pandemic differential of 46 percentage points for national firms and 41 percentage points for regional firms in December 2019. As in the prior year’s survey, fewer firms in the national sample reported higher input and wage costs as a financial challenge in recent years. Employment Like their poorer revenue conditions, the employment performance of regional firms was also worse than that of national firms in 2025. Year-over-year employment growth held steady for all national firms except for the larger ones (with ten or more employees), which have exhibited weakening employment recovery after 2022. In contrast, employment growth fell for regional firms of all sizes in 2025, decreasing by 9 percentage points overall. Mirroring pessimistic revenue expectations, a lower share of firms of all sizes expected higher employment growth in 2026 relative to recent years. However, the magnitude of declining expectations was markedly higher for regional as compared to national firms. Thus, the net share of firms expecting to generate employment in 2026, relative to 2025, declined by 16 percentage points for regional firms but less than 4 percentage points for national firms (see chart below). Indeed, for the first time in the survey, large regional firms expected negative employment growth. These results are part of an ongoing pattern whereby firms in the region have struggled to generate employment since the pandemic. Expected Change in Employment for 2026 Declined Sharply for Regional Small Businesses Indebtedness Debt (defined as the mid-point of the range reported by respondents) in 2025 was about $67,000 per employee for national firms, similar to 2024, and $81,000 per employee for regional firms, a small increase from 2024. Similar shares of firms received less than the full amount of credit that they applied for and reported that they did not apply for credit because they did not need funds as in 2024, suggesting that credit supply was typically not a major constraint in 2025. Technology and Supply Chain In the region, more firms of all sizes reported difficulties with utilizing technology while the share of firms reporting supply chain issues continued to decline both nationally and regionally. Summing Up Using annual survey data, we report on national and Second District trends in small business performance from 2019 to 2025.