US Small Business Optimism Rises to Highest Level Since August 2025
Data released by the NFIB on Tuesday showed that US small business optimism rebounded in July after four consecutive months of decline, with the index rising to 99.8, the highest since August 2025. Twenty percent of surveyed businesses plan to expand hiring in the next three months, the highest level since October 2022. Meanwhile, concerns about labor quality have intensified, while inflationary pressures have eased somewhat.
Key Points:
- The National Federation of Independent Business (NFIB) said on Tuesday that optimism among U.S. small business owners rebounded last month to its highest level since August 2025, with positive hiring plans boosting confidence more than any other factor.
- After four consecutive months of declines, the NFIB Small Business Optimism Index rose 2.4 points in July to 99.8, above its 52-year average of 98. The NFIB said that, seasonally adjusted, 20% of small business owners plan to expand hiring over the next three months, the highest level since October 2022 and 9 percentage points above the historical average.
- Meanwhile, doubts about whether it is a good time to expand pushed that uncertainty indicator above its historical average. NFIB Chief Economist Bill Dunkelberg said in a statement: "Despite current high uncertainty, Main Street businesses expect business conditions to continue improving."
Deeper Analysis:
Small businesses employ 46% of the U.S. private sector workforce, and compared with larger firms, they often show signs of strain from inflation, rising borrowing costs, labor market instability, and economic weakness earlier.
Alongside plans for active hiring, the NFIB said that in July, 27% of small business owners cited "labor quality or availability" as their biggest problem, up 8 percentage points from June and 15 percentage points above the historical average.
Last month, more than a third (36%) of small businesses reported being unable to fill job openings, up 4 percentage points from June and the highest reading since June 2025.
Indicators of job openings across all U.S. employers show that the U.S. Department of Labor said last Friday that the economy lost 23,000 jobs last month. Additionally, revisions to labor market data by the Department of Labor reduced the combined job gains for May and June by 103,000. The unemployment rate fell to 4.1% from 4.2% in June.
The NFIB said that for the first time since 2026, the share of small businesses citing inflation as their biggest problem declined. According to NFIB data, only 14% of business owners listed inflation as their most important challenge, down 7 percentage points from June.
The NFIB said that last month, small businesses ranked inflation as the third-biggest problem, and for the first time since 2026, they reduced both actual and planned price increases.
Oliver Allen, senior economist at Pantheon Macroeconomics, noted in a report that the survey "raises almost no inflation alarms." He said the share of small businesses planning to raise wages is close to pre-pandemic averages, adding that the survey data "remains consistent with underlying wage growth staying under control."