A low-hire, low-fire labor market has made breaking into the workforce brutally hard for Gen Z. But while most young people are struggling to land their first opportunity, some have jumped the line by building their own small businesses and startups—and young founders are now ramping up hiring even as companies across industries slow theirs.
A low-hire, low-fire labor market has made breaking into the workforce brutally hard for Gen Z. But while most young people are struggling to land their first opportunity, some have jumped the line by building their own small businesses and startups—and young founders are now ramping up hiring even as companies across industries slow theirs.
New data from the Q3 2026 Small Business Index, produced by Justworks and the U.S. Chamber of Commerce, shows that 46% of Gen Z and millennial business owners plan to increase staff in the next year, compared with just 19% of owners in the baby boomer generation or older.
According to Justworks CEO Mike Seckler, young owners are generally more confident about investing in their businesses, even in an economy where most companies have played it safe.
“Young entrepreneurs, like Gen Z and millennial entrepreneurs, are much more bullish about how their businesses look, and they’re more confident hiring right now than folks from older generations,” Seckler told Fortune.
Gen Z and millennial owners plan not just to hire more but to spend more across the board, and they’re optimistic about where their businesses are headed. Fifty percent plan to increase investment, compared with 18% of boomer owners, and 71% expect revenue growth, versus 51% of their older peers. That optimism stands out against a cautious small business sector overall: Just 36% of all owners anticipate adding staff, down from 44% a year earlier.
A job market that’s shutting out new entrants
The broader labor market tells a different story. Former Fed Chair Jerome Powell, who still sits on the Federal Reserve’s Board of Governors, has described it as a low-hire, low-fire job market: Employers aren’t laying off many workers, but they aren’t hiring many either. That makes it hard for anyone trying to switch industries or join the workforce for the first time, and research from the Federal Reserve Bank of St. Louis shows young adults are bearing the brunt of it. Some economists have warned the market could tip into “low-hire, more-fire.”
Only 1.9% of nonfarm workers quit their jobs in August, according to the Bureau of Labor Statistics—matching the lowest quits rate since 2020. Hiring is also down: The September jobs report found employers added just 29,000 jobs, far below economists’ expectations, while unemployment rose to 4.2%.
Companies are being more conservative in their hiring decisions, partly because of inflation fueled by the Iran war and U.S. tariff policy, as well as the rise of AI automating tasks usually assigned to early-career hires. One in three employers say they’re replacing entry-level roles with AI, according to a recent Graduate Management Admission Council survey.
Why young founders aren’t flinching
Seckler believes this turbulent business environment, which is sharply changing business practices in established industries, isn’t rattling younger business owners as much. He sees a “decoupling” between young entrepreneurs’ confidence in their businesses and the current economy, which has always been stormy for them and likely will remain so.
“I think it’s important to remember the context in which these folks grew up and what they had to survive over the past five years,” Seckler says. “Given either what they’ve been through or given what they’ve kind of seen in their lives, I think they have a mindset of like the outside world has always been crazy and will continue to be difficult. Yet I’ve already proven to myself that I can thrive in this.”
Seckler adds that young founders are more likely to run their businesses with the technology they grew up with, making it easier to scale quickly than institutions that must adapt long-held processes and systems to new innovations.
“I think some of it is that Gen Z and millennial founders came of age with a whole new set of tools for building these companies that is kind of enabling them to have success and to do big things even with small teams,” Seckler explains.
Gen Z redefines the road to success
Gen Z sees risk differently, and that has shaped not only how they run their businesses but whether they consider that path at all. While many Gen Zers struggle to begin their climb up the corporate ladder, they’ve started to view entrepreneurship—long considered the precarious option—as the safer bet.
Seckler explains that young people’s trust in institutions and companies has dropped. They no longer believe that if “they put their heads down, good outcomes will happen.” As a result, building something themselves seems the preferable path.
Many Gen Z graduates have concluded the contract that once existed with employers is gone, so they’re weighing alternatives. Nearly 38% of the recent and soon-to-be college graduates surveyed for ZipRecruiter’s 2026 Graduate Report said they’re considering starting their own business, Fortune previously reported.
“The old model was: graduate, find an entry-level job, climb from there,” Nicole Bachaud, labor economist at ZipRecruiter, said in a statement. “What we’re seeing now is something less linear, yet their outcomes are actually improving.”
“Grads are piecing together experience through internships, side work, stepping-stone roles, and even starting their own ventures,” she added.
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