A comprehensive analysis of Small Business Administration data reveals a striking contradiction in America’s post-pandemic economic recovery: while new businesses continue to emerge across the country, 24 states have actually lost small business jobs over the past three years.
The study, conducted by entrepreneurship research platform Founder Reports, examined four years of federal data from 2022 to 2025 to track small business performance across all 50 states and the District of Columbia. The findings expose what researchers term an “employment paradox” where business creation and job creation are moving in opposite directions.
Hawaii experienced the steepest decline in small business employment, losing 7.7 percent of its workforce in this sector. New York and West Virginia followed closely behind, each shedding 4.9 percent of their small business jobs. Other major states showing significant losses include Illinois with a 2.2 percent decrease, Connecticut at 2.1 percent, and Pennsylvania and Michigan each losing 1.5 percent of their small business workforce.
The data suggests companies are launching more frequently but operating with leaner staffing models. Illinois exemplifies this trend, ranking 42nd overall despite achieving 8.7 percent growth in total small businesses. The state added thousands of new enterprises while simultaneously losing 2.2 percent of its small business employment.
Western states emerged as clear winners in the post-pandemic recovery period. Utah claimed the top position with 14.4 percent business growth and 10.3 percent employee growth, making it one of the few states where both metrics showed strong upward movement. Idaho recorded the nation’s highest small business employee growth at 11.2 percent while maintaining 12.9 percent growth in total businesses.
Five western states captured positions in the top 10 rankings: Utah, Idaho (third place), Nevada (fourth), Arizona (seventh), and Montana (tenth). Nevada achieved the highest net business creation rate nationwide at 6.7 percent.
Population size proved to be a poor predictor of small business success. States with populations exceeding 10 million generally struggled in the rankings. California, despite its reputation as an innovation center, managed only 32nd place with a modest 2.2 percent employee growth. New York landed at the bottom of the rankings in 50th place due to its 4.9 percent decline in small business employment.
Florida stood out as the notable exception among large states, securing fifth place with 17.2 percent business growth and 6.2 percent employee growth. The Southeastern region showed strong performance overall, with Georgia, South Carolina, North Carolina, and Tennessee all earning spots in the top 10.
The research methodology involved analyzing multiple factors, including total business counts, employee numbers, and business openings and closures. Researchers applied weighted scoring that gave 50 percent weight to employee growth, 25 percent to total business growth, and 25 percent to net business creation rates.
Small businesses employ nearly half of America’s private workforce and represent a crucial indicator of economic health. The mixed signals from the data highlight the complex nature of post-pandemic recovery, where entrepreneurial activity remains robust even as employment patterns shift.
The complete state rankings and detailed analysis provide entrepreneurs and policymakers with data-driven insights for understanding regional business climates and making strategic decisions about expansion and investment opportunities.
These findings arrive as federal and state governments continue evaluating support programs for small businesses, which remain the backbone of the American economy despite facing ongoing challenges related to labor costs, market conditions, and evolving consumer behaviors in the post-pandemic landscape.
