Understanding Early Economic Trends Through Small Businesses Beyond Wall Street Metrics

Understanding Economic Trends Through Small Businesses

Recent research conducted in collaboration with GoDaddy and UCLA Anderson Forecast reveals that data from small businesses provides pivotal insights into the economy that often remain hidden in traditional financial metrics. As digital business activity has surged, especially in late 2025, these insights are increasingly crucial for understanding economic health before it manifests in broader market indicators.

The Power of Small Business Data

The study, titled "What Small Businesses Tell Us About the Economy That Wall Street Can't," presents a new perspective known as "Small Street," which is designed to act as a real-time lens alongside familiar market indicators like Wall Street’s stock performance. What is significant about this data is its ability to capture entrepreneurial activity across millions of digital small businesses, providing a more timely and localized understanding of economic shifts.

In the fourth quarter of 2025, GoDaddy's Participation Index showed a marked increase compared to the fourth quarter of 2024, signaling a revival in digital small business activity. Historically, such increases in the Participation Index have been precursors to stronger job growth and declining unemployment rates within the subsequent three to four quarters.

According to Alexandra Rosen, who leads GoDaddy's Small Business Research Lab, traditional economic indicators often come with delays and limitations. The real-time nature of digital entrepreneurship provides a clearer picture of economic health, making it imperative to incorporate small business performance into our analyses. This understanding goes beyond mere adaptations; it reflects the very essence of economic growth happening at grassroots levels.

Small Street’s Insights vs Traditional Indicators

The research highlights that small business indicators correlate more strongly with essential economic metrics such as GDP growth and employment trends than stock market performance, which has historically had a more modest relationship. Specifically, a 1% increase in business formations is associated with approximately 0.18% higher GDP growth and about a 0.16% increase in payroll employment growth.

What’s more telling is that changes in small business activities precede traditional labor data. New business formations often relate to higher payroll employment three quarters down the line and correspond to lower unemployment about one year later. This relationship underscores the notion that entrepreneurial activities can serve as a bellwether for local economic conditions, offering insights that government datasets may take longer to reflect.

Evidence from GoDaddy's data indicates a robust correlation between the number of digital entrepreneurs and local business formation, providing reinforcing evidence for small businesses as a reliable economic indicator. Particularly, their data showed a significant correlation of 0.84 with establishments that employ fewer than five people.

The Need for a Multi-Faceted Economic View

William Yu, an economist at UCLA Anderson Forecast, emphasizes that no single economic indicator is enough to grasp the full scope of economic health. Each metric, whether it be from Wall Street or traditional labor statistics, illuminates different facets of the economic landscape. The introduction of this Small Street perspective sheds light on dimensions of economic health neglected by traditional models, especially those concerning local economies.

The importance of these findings is underscored by Curtis Dubay, Chief Economist at the U.S. Chamber of Commerce, who points out that small businesses act as the most direct and timely signal of economic vitality within communities across America. This research does not claim to predict precise future economic outcomes but rather showcases the incomplete picture that emerges when solely relying on stock market performance.

Conclusion

In conclusion, the emergence of the Small Street data alongside traditional Wall Street metrics offers new opportunities for insights into the economic shifts occurring at a community level. As digital entrepreneurs continue to rise and reshape the economy, capturing this data can facilitate a more proactive understanding of economic trends and empower stakeholders—ranging from journalists to policymakers—to better address the changing economic landscape.

The complete findings, alongside deeper insights from GoDaddy's research initiatives, can be accessed at research.godaddy/wallstreet.