Small Business Optimism Falls Below Long-Term Average

The NFIB Small Business Optimism Index edged down 0.8 points to 97.9 in September, falling slightly below the 52-year average of 98. The decline was driven by worsening expectations for business conditions and fewer reports that it is a good time to expand. Of the 10 components in the index, three increased, six decreased and one stayed the same. Meanwhile, the Uncertainty Index rose 1 point to 90, still well above the 51-year average (68) and above the average since 2016 (80).

Labor quality or availability was again cited as the top concern for small business owners in September, with 26% reporting it as the most important problem, up 3 points from August. In addition, 87% of owners who are hiring or trying to hire reported few or no qualified applicants for the positions they were trying to fill. The share of businesses reporting inflation as the most important problem rose 4 points from August to 20%, with a net 31% of owners raising prices. Meanwhile, taxes and poor sales shared the third spot at 11%.

A net 28% of small business owners reported raising compensation, down 3 points in September after staying the same in August. Meanwhile, 20% of business owners plan to increase compensation in the next three months, up 2 points from August. Profitability weakened in September, with positive profit trends ticking down 1 point from August to a net negative 20%. Among owners reporting lower profits, 34% blamed weaker sales, 24% cited rising material costs, 10% reported usual seasonal changes, 8% mentioned price changes, 7% cited labor costs and 3% noted insurance costs. Meanwhile, 3% of owners reported their last loan was harder to get than previous attempts, unchanged from August, and a net 8% of owners cited paying higher interest rates on their most recent loan, up 4 points from the prior month.

The outlook for general business conditions fell 4 points to 6%, after declining 5 points in August. At the same time, expectations for better business conditions are down 17 points from September 2025. Meanwhile, 7% reported it was a good time to expand their business, down 5 points from August and a weak reading compared to times of economic expansion. Overall, small business owners are less optimistic as expected business conditions worsened.