BofA says job growth only booming in one surprising sector | Official Website of Louis Velazquez, entrepreneur, finance guy and tech innovator

February was a strong month for small businesses in spite of some pretty severe headwinds, according to the latest research from Bank of America.

Despite increased cost pressures from inflation, economic uncertainty, and the prospect of further price hikes, small business profits increased 1.2% year over year in February. The inflow-to-outflow ratio from its small business accounts, which reflects profitability, reached 1.03 in February, its highest level since March 2025.

While that is good news for the economy, the firm does acknowledge that February and March are often strong months for small businesses because that’s when they often receive their tax refunds, “and nearly 40% view their refund as a mix of both business and personal money,” according to a BofA note emailed to TheStreet.

While the term “small business” conjures images of mom-and-pop stores on Main Ave., it actually refers to companies with up to 500 employees. Most non-manufacturing businesses with average annual receipts under $7.5 million in the U.S. will qualify as a small business, according to the Small Business Administration.

Bank of America tracks an even minute sliver of the economy: “microbusinesses.”

Microbusinesses have annual revenues of less than $500,000 and between $500,000 and $1 million. For microbusinesses with annual revenues below $500K, profitability growth was the strongest in February since April 2025.

One of the biggest expenses for small businesses is labor, and according to BofA small business payments data, payroll payments per client were nearly 5% below the 2024 February average, but they did increase slightly from a January low.

Meanwhile, small businesses in higher-revenue tiers were just below or above the 2024 average, and the firm says this is evidence that wage inflation is not affecting bottom lines.

The small-business labor market is still tight.

Photo by Witthaya Prasongsin on Getty Images

Small wholesalers represent lone business sector showing payroll growth

U.S. employers unexpectedly cut nearly 100,000 non-farm payroll jobs in February, according to the Bureau of Labor Statistics, a month where analysts polled by Bloomberg were expecting the economy to add 55,000 jobs.

But small business hiring, while uneven, was less dramatic than in February, according to Bank of America. February was a soft month for job growth, and small businesses in the construction and lodging industries saw payroll reductions of more than 1.5%, while the finance, retail, restaurants, and services industries saw more modest declines.

However, wholesale retailers were the only group to see payroll growth per small business client increase on a three-month moving average through February. While growth over 1% is great, the fact that the rest of the sector performed so poorly is some cause for concern.

According to survey data from the National Federation of Independent Businesses cited by BofA, the small-business labor market remains tight by historical standards as both job openings and wage depression remain elevated.

With the exception of retail, payroll levels across most sectors remain below their 2024 average. “Overall, the data point to a labor market that is easing at the margins, but not enough to prompt broad-based hiring among small firms,” BofA says.

Iran war is expected to put extra pressure on gas prices and employment

Markets have been pressured by the sudden outbreak of all-out war in the Middle East as the U.S. and Israel bomb Iran and Iran retaliates against Israel, U.S. combat bases in the region, and perhaps most disruptively, the oil infrastructures of the countries hosting those U.S. army bases.

Earlier this month, Iran announced that it was closing the Strait of Hormuz, sending gas prices soaring overnight, rising 11 cents in the biggest single-day jump in two decades, to $3.11 per gallon on average.

About 20% of the world’s oil travels through the Straight of Hormuz, and analysts feared oil prices could surge to $100 a barrel. They have since blown past that mark.

Brent crude climbed to about $108.40 per barrel on Wednesday while U.S. West Texas Intermediate traded at $98.50.

Since the war broke out on March 1, it had no effect on the February jobs report, but the snowball effect from higher oil prices could show up in the March report.

“The jobs report was weaker than expected, and this does include the possible drag on employment from higher oil prices,” Head of Investment Strategy at Global X Scott Helfstein, said in an email to TheStreet. “Sharp increases in oil prices typically coincide with labor force reductions. When oil prices spike by 20%, the U.S. typically loses jobs, and that is the current scenario.”

The last time the Brent crude oil price hit $100 was in 2011, when speculators thought the “Arab Spring” in Egypt could lead to the closure of the Suez Canal.

On Wednesday, Iran vowed to retaliate against U.S. and Israeli energy interests in the region after its own gas and oil infrastructure in South Pars and Asaluyeh were targeted in an Israeli airstrike.

More jobs news:

The South Pars gas field is the world’s largest natural gas reserve and is jointly operated by Iran and Qatar. The U.S. and President Donald Trump have previously opposed strikes on oil facilities due to the effect on gas prices. However, it seems that the calculation has changed with the latest strikes.

If oil prices remain elevated, the cascading effects could be devastating to the U.S. employment situation.