The New York Fed Surveyed Small Business Owners on AI Adoption. Users' Hiring Outlook Is More Than Double Non-Users'.

October 11, 2026 · Josh Agusti, Founder, Aiven Consulting Group

For the past two years, most of the loudest claims about AI and jobs have come from large enterprises, and most of them have pointed toward headcount reductions.

A new analysis from the Federal Reserve Bank of New York's Liberty Street Economics blog looks at a different population entirely: small business owners. Economists Will Aarons and Asani Sarkar used the Federal Reserve's 2025 Small Business Credit Survey, an annual survey of firms with fewer than 500 employees fielded each fall, to ask a narrower question. Among small businesses that are already using AI, what do their owners expect to happen to employment and revenue over the next twelve months, compared to owners who aren't using it yet?

The adoption numbers alone are a signal of how far this has moved past early experimentation. Forty-six percent of firms with at least one employee said their business or its employees are already using AI tools, and another 15 percent said they plan to adopt within the next year. That puts six in ten small employers either using AI today or committed to starting soon, inside a survey population that skews toward local retailers, contractors, restaurants, and professional service firms rather than technology companies.

AI Users Expect to Hire, Not Cut

The clearest result in the data is the gap in hiring outlook. On the survey's net-share measure, which subtracts the percentage of owners expecting to cut workers from the percentage expecting to add them, firms already using AI came in at a net positive 33 points. Firms that hadn't adopted AI came in at only 15 points, less than half as strong. Aarons and Sarkar report that this gap survived their attempt to control it away: it held up even after accounting for differences in firm size, owner characteristics, industry, and location. Revenue told a similar story on an even wider scale. AI-using firms posted a net positive revenue outlook of 48 points, compared with 21 points for firms that hadn't adopted AI.

The Twist: Optimism Rises With Friction, Not Away From It

The more surprising detail sits one layer down. The owners with the rosiest revenue expectations weren't the ones who said AI was working smoothly. They were the ones who said they were still wrestling with real implementation problems: picking the right tools, fitting them into existing workflows, training staff to use them well. Read generously, that isn't a contradiction so much as a signal. Owners who are still in the thick of adopting AI, rather than having abandoned it or never tried, may be the ones closest to actually getting value out of it, and their expectations seem to reflect that. AI readiness for a small business, in other words, doesn't have to mean a clean rollout. It can mean still being in the messy middle and betting that it pays off anyway.

A Necessary Caveat Before Anyone Draws a Strategy From This

Aarons and Sarkar are careful not to oversell what a survey like this can prove. Expecting something and experiencing it are two different things, and owner optimism isn't a verified return. The authors flag a more mundane alternative explanation: businesses that have had a strong year tend to expect another one, regardless of whether they use AI, and the data backs that up to some degree, since how a firm's employee count actually changed over the past year tracks fairly closely with what the owner expects for the year ahead. Some of the optimism among AI users may reflect momentum those firms already had, not something AI itself produced. Whether AI adopters go on to actually realize the hiring and revenue gains they're expecting is, by the authors' own account, a question for future research rather than something this survey settles.

What This Means for How Small Business Owners Should Read It

None of this means a small business owner should treat AI adoption as a guaranteed path to more hiring and revenue, and it would be a mistake to read a correlational survey finding that way. What it does suggest is that the dominant narrative about AI and jobs, built mostly on announcements from large public companies, doesn't automatically translate to smaller scale. Among owners who know their own numbers well enough to answer a Federal Reserve survey about them, using AI tracks with expecting to grow, not shrink, by a wide margin. For owners trying to figure out where they stand before making a similar bet, that's a more useful starting point than either the enterprise headcount headlines or the hype cycle: a plain AI operating model question of where AI actually touches the work, and whether the people doing that work are being set up to grow with it or replaced by it.

Key Takeaways

New York Fed economists Will Aarons and Asani Sarkar found that small businesses already using AI posted a net positive hiring outlook of 33 points on the survey's diffusion measure, more than double the 15-point reading among firms that hadn't adopted AI, and the gap held up after controlling for firm size, industry, and location.
AI adoption among small employers is now mainstream: 46% of firms with at least one employee said their business or employees already use AI tools, and another 15% plan to adopt within the next twelve months.
The optimism comes with a real caveat: the most upbeat revenue expectations came from AI users who said they were still working through real implementation problems, and the researchers note that firms with a strong recent track record tend to expect another strong year regardless of AI, so some of the gap may reflect existing momentum rather than AI itself.