New NFIB Small Business Optimism Index Offers Some Good News

The Washington, D.C.-based National Federation of Independent Business’ (NFIB) Small Business Optimism Index declined 0.6 points in October to 98.2, but remained above its 52-year average of 98. Better news: the Uncertainty Index fell 12 points from September to 88, the lowest reading of this year.

“Optimism among small businesses declined slightly in October as owners report lower sales and reduced profits,” said NFIB chief economist Bill Dunkelberg. “Additionally, many firms are still navigating a labor shortage and want to hire but are having difficulty doing so, with labor quality being the top issue for Main Street.”

In conjunction with the October report, the NFIB Research Center is debuting a new podcast – “Small Business by the Numbers” – where hosts discuss everything related to the small business economy. Co-hosts Holly Wade, executive director of the NFIB Research Center, and Peter Hansen, director of Research and Policy Analysis, will discuss data, stories, and the economic conditions affecting small businesses nationwide. (You can listen to the intro and first episodes here.)

Key findings of the Optimism Index released in November include:

• Thirty-two percent (seasonally adjusted) of all owners reported job openings they could not fill in the current period, unchanged for the second consecutive month. Before August, the last time unfilled job openings hit 32% was in December 2020.

• In October, 27% of small business owners cited labor quality as their single most important problem, up 9 points from September and the highest level since the record high of 29% in November 2021. Labor quality ranked as the top problem and was 11 points higher than taxes, which ranked second.

• A net negative 13% of all owners (seasonally adjusted) reported higher nominal sales in the past three months, down 6 points from September.

• The frequency of reports of positive profit trends fell 9 points from September to a net negative 25% (seasonally adjusted). This component contributed the greatest to the decline in the Optimism Index.

• In October, both actual and planned price increases fell from the previous month. The net percent of owners raising average selling prices fell 3 points from September to a net 21% (seasonally adjusted). Looking forward to the next three months, a net 30% (seasonally adjusted) plan to increase prices (down 1 point from September).

• The net percent of owners reporting inventory gains fell 3 points to a net negative 6% (seasonally adjusted). Not seasonally adjusted, 10% reported increases in stocks (unchanged), and 15% reported reductions (up 3 points).

• In October, 60% of small business owners reported that supply chain disruptions were affecting their business to some degree, down 4 points from September.

• The net percent of owners expecting better business conditions fell 3 points from September to a net 20% (seasonally adjusted), the lowest level since April but remaining above the historical average of net 4%.

Hiring numbers stumble

As reported in NFIB’s monthly jobs report, a seasonally adjusted 32% of all small business owners reported job openings they could not fill in October, unchanged for the second consecutive month. Before August, the last time unfilled job openings hit 32% was in December 2020. Of the 56% of owners hiring – or trying to hire – in October, 88% reported few or no qualified applicants for the positions they were trying to fill. A seasonally adjusted net 15% of owners plan to create new jobs in the next three months, down 1 point from September. This marks the first decline since hiring plans started to increase in May 2025.

Labor costs – reported as the single most important problem for business owners – fell by 3 points from September to 8%. Seasonally adjusted, a net 26% reported raising compensation, down 5 points from September. A seasonally adjusted net 19% plan to raise compensation in the next three months, unchanged from September.

Roughly 55% of small business owners reported capital outlays in the last six months, down 1 point from September. Of those making expenditures, 36% reported spending on new equipment, 22% acquired vehicles, and 14% improved or expanded facilities. About 13% spent money on new fixtures and furniture and 3% acquired new buildings or land for expansion. Futhermore, 23% (seasonally adjusted) plan capital outlays in the next six months, up 2 points from September.

Sales volume & inventory concerns

A net negative 13% of all owners (seasonally adjusted) reported higher nominal sales in the past three months, down 6 points from September. The net percent of owners expecting higher real sales volumes fell 2 points from September to a net 6% (seasonally adjusted).

The net percent of owners reporting inventory gains fell 3 points to a net negative 6%, seasonally adjusted. Not seasonally adjusted, 10% reported increases in stocks, and 15% reported reductions. A net negative 4% (seasonally adjusted) of owners viewed current inventory stocks as “too low” in October, up 3 points from September’s largest monthly decline in the survey’s history. A net negative 2% (seasonally adjusted) of owners plan inventory investment in the coming months, down 3 points from September.

In October, both actual and planned price increases fell from the previous month. The net percent of owners raising average selling prices fell 3 points from September to a net 21% (seasonally adjusted). Despite the decline, price increases remain above the monthly average of a net 13%, suggesting continued inflationary pressure.

Unadjusted, 31% reported higher average prices (down 2 points), and 12% reported lower average selling prices (up 2 points). Looking forward to the next three months, a net 30% (seasonally adjusted) plan to increase prices (down 1 point from September).

The frequency of reports of positive profit trends fell 9 points from September to a net negative 25% (seasonally adjusted). This component contributed the greatest to the decline in the Optimism Index. Among owners reporting lower profits, 33% blamed weaker sales, 16% cited the rise in the cost of materials, 9% cited price change for their product(s) or service(s), and 9% cited labor costs. Among owners reporting higher profits, 53% cited sales volume, 17% cited usual seasonal change, and 11% cited higher selling prices.

Financing remains challenging

A net 5% of owners reported their last loan was harder to get than in previous attempts, down 2 points from September’s highest reading of this year. In October, a net 1% of owners reported paying a higher interest rate on their most recent loan, down 6 points from September. The average rate paid on short maturity loans was 8.7% in October, down 0.1 points from September. Roughly 23% of all owners reported borrowing on a regular basis, down 3 points from September.

In October, owners’ overall assessment of their business’ health declined from the previous month as more reported it as “fair” rather than “good.” When asked to evaluate the overall health of their business, 12% reported it as excellent (up 1 point), and 51% reported it as good (down 6 points). About 33% of owners reported the health of their business as fair (up 6 points), and 4% reported it as poor (unchanged).

The net percent of owners expecting better business conditions fell 3 points from September to a net 20% (seasonally adjusted), the lowest level since April but remaining above the historical average of net 4%.

In October, 13% (seasonally adjusted) reported that it is a good time to expand their business, up 2 points from September. Compared to readings during economic expansions, this is a relatively weak reading.

Additional factors

Approximately 27% of small business owners reported labor quality as their single most important problem, up 9 points from September and ranking as the top problem. The percentage of small business owners reporting labor costs as their single most important problem fell 3 points to 8%.

Roughly 12% of owners reported that inflation was their single most important problem in operating their business, down 2 points from September.

And the percent of small business owners reporting poor sales as their top business problem remained at 10%.

In October, 8% reported the cost or availability of insurance as the single most important problem, unchanged from September. Roughly 2% of owners reported that financing and interest rates were their top business problems in October, down 2 points from September.

Approximately 5% of owners reported competition from large businesses as their single most important problem, unchanged from September.

The NFIB Research Center has collected Small Business Economic Trends data with quarterly surveys since the fourth quarter of 1973 and monthly surveys since 1986. Survey respondents are randomly drawn from NFIB’s membership. The report is released on the second Tuesday of each month. The next survey results will be available in December.