Small Business Optimism Above Average on Hiring and Investment Plans

The NFIB Small Business Optimism Index increased 2.4 points to 99.8 in July, climbing above the 52-year average of 98. July’s gain was due to an improvement in hiring and capital investment plans. Of the 10 components in the index, eight increased and two decreased. Meanwhile, the Uncertainty Index rose 2 points to 91, still well above the 51-year average (68) and above the average since 2016 (80).

Labor quality or availability was cited as the top concern for small business owners, with 27% reporting it as the most important problem, up 8 points from June. In addition, 85% 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 taxes as the most important problem dropped 3 points to 16%, the lowest level since November 2025. Meanwhile, inflation was third in the list of concerns at 14%, down 7 points, with a net 31% of owners raising prices.

A net 31% of small business owners reported raising compensation, up 3 points in July after moving down 3 points in June. Meanwhile, 19% of business owners plan to increase compensation in the next three months, up 2 points from June. Pressure on profitability weakened in July, with positive profit trends rising 4 points from June to a net negative 16%. Among owners reporting lower profits, 30% blamed weaker sales, 16% cited rising material costs, 9% mentioned usual seasonal changes and 8% cited insurance costs. Meanwhile 5% of owners reported their last loan was harder to get than previous attempts, up 2 points from June, and a net 4% of owners cited paying higher interest rates on their most recent loan, down 1 point from the prior month.

The outlook for general business conditions rose 2 points to 15%, after climbing 10 points in June. At the same time, expectations for better business conditions are down 21 points from July 2025. Meanwhile, 12% reported it is a good time to expand their business, up 4 points from June but a weak reading compared to times of economic expansion. Overall, small business owners are more optimistic as expected business conditions improved.