The start of the Covid pandemic five years ago marks the last time the center so eagerly anticipated MMI data. As the world ground to a halt, we needed to understand how middle market companies were affected and how they were dealing with universal challenges. Not surprisingly, the middle market bounced back quickly, and, over the past few years, it has demonstrated resilient growth across a number of measures. Now, the chaotic policy nature of the first half of 2025 finds the U.S. middle market once again contending with uncertainty driven by external forces.
Growth Slows
Since the end of 2021, revenue growth in the middle market has averaged 12.1% year-over-year. The data has been remarkably consistent, not spiking up or down in any given survey. That has now changed dramatically, as top-line revenue growth has fallen to 10.7%. Double-digit growth is still impressive, yet just one year ago, the growth rate was 12.9%. Interestingly, the only other drops of similar severity occurred the summers following the 2016 and 2020 elections, and, of course, at the start of the pandemic.
Hiring at middle market companies fell even more significantly this period, from 10.3% employment growth in 2024 down to 7.4% for mid 2025. Macroeconomic conditions such as inflation, high interest rates and talent shortages/skills gaps have existed for some time, suggesting that the current slowdown is a result of changes occurring since the end of 2024.
Uncertainty Drives a Defensive Posture
Trade policy and tariffs have been a significant source of confusion, uncertainty and disruption for many companies, and the middle market is not immune. While small businesses are unlikely to have global relationships and enterprise organizations benefit from robust resources to manage their supply chains along with the ability to exert more influence and control, the middle market once again finds itself caught in a “no man’s land” where challenges are significant but resources might be lacking. Certainly, tariffs present a more difficult challenge for capital-intensive industries such as manufacturing, construction and retail, all of which indicate they have paused many decisions, capital projects and expansion while awaiting some semblance of an outcome on policy. For more information on trade and tariffs, see our Spotlight article.
Tariff inconsistency isn’t the only factor driving lower confidence and investment. Growing geopolitical tensions remain a concern, as does lingering inflation for various products and services. Combine these challenges with relatively high interest rates, and the appetite for actions like significant market expansion, new product innovation/introduction and potential acquisitions (or exits) has declined. As an example, only 56% of mid-market leaders plan to invest back in their business, down from a high of 65% at the end of 2024.
Bright Spots in a Cloudy Future
Despite the uncertain climate, not all the sentiment is negative. For instance, even with slower revenue growth, muted projections and a slowdown in hiring, middle market companies are not laying off employees as a result of higher business costs. This behavior is consistent with previous cycles (such as coming out of the financial crisis) when large firms shed significant numbers of people while the middle market continued to add jobs, reflecting the longer-term perspective of these leaders.
Technology remains a significant focus for the middle market. Platforms that were once considered too expensive, complicated or unnecessary are now being scaled to fit specific needs. Leaders increasingly realize the right technology for their business can help cut costs, improve productivity and address potential workforce challenges and skills gaps. Take artificial intelligence, for example – we’ve been tracking this theme the past few years. While only 12% of middle market companies say they are building in-house AI capabilities, nearly 60% are training their workforce on AI tools.
Finally, the result of challenges presented by the pandemic, difficult macroeconomic conditions and now policy fluctuations has built stronger, more resilient processes in many companies. More firms tell us they are better equipped today to handle disruptions, and when faced with one, they typically recover very quickly. A resilient middle market is a good thing for the U.S. economy as well as the many communities these businesses support.