Small business optimism rebounds to highest level since Aug. 2025: NFIB

Dive Brief:

Optimism among U.S. small businesses last month rebounded to the highest level since August 2025, with ambitious hiring plans pushing up sentiment more than any other factor, the National Federation of Independent Business said Tuesday.
After four straight months of decline, the NFIB Small Business Optimism Index increased 2.4 points in July to 99.8, exceeding its 52-year average of 98. A seasonally-adjusted 20% of small business owners plan to expand payrolls in the next three months, the highest level since October 2022 and 9 points above the historical average, the NFIB said.
At the same time, doubts about whether it is a good time for expansion pushed a gauge of uncertainty above the historical average, the federation said. “Although uncertainty is currently elevated, Main Street anticipates that business conditions will continue to improve,” NFIB Chief Economist Bill Dunkelberg said in a statement.

Dive Insight:

Small businesses employ 46% of the U.S. private sector workforce and, compared with larger businesses, show earlier strains from inflation, higher borrowing costs, labor market instability and economic weakness.

As they plan ambitious hiring, 27% of small business owners cited “labor quality or availability” as their biggest problem in July, an increase of 8 percentage points from June and 15 percentage points above the historical average, the NFIB said.

Last month more than one out of three small businesses (36%) reported they could not fill job openings, an increase of 4 percentage points from June and the highest reading since June 2025.

A gauge of work opportunities at all U.S. employers showed that the economy shed 23,000 jobs last month, the Labor Department said Friday.

Also, revisions to labor market results trimmed the total number of jobs added by 103,000 during May and June, according to the Labor Department. The unemployment rate fell to 4.1% from 4.2% in June.

Reports of inflation as the biggest problem among small businesses fell for the first time in 2026, NFIB said.

Only 14% of business owners cited inflation as their most important challenge, 7 percentage points less than in June, according to NFIB.

Small businesses ranked inflation third among their problems last month and, for the first time in 2026, scaled back both actual and planned price increases, the NFIB said.

The survey included “few alarm bells on inflation,” Pantheon Macroeconomics Senior Economist Oliver Allen said in a note.

The percentage of small businesses planning to raise wages is not far from the pre-pandemic average, he said, adding the survey data “still looks consistent with underlying wage growth remaining contained.”