Small Business Owners Face Labor Shortages, Economic Uncertainty Yet Remain Optimistic: NFIB Survey

Small business owners across the United States are feeling conflicted emotions about the current state of affairs, as well as the prospects offered up by the immediate future, according to the latest National Federation of Independent Business study published on Feb. 11.

The NFIB Small Business Optimism Index fell slightly in January, by 2.3 points, to rest at 102.8. That figure represents the third consecutive month — lining up with the election results of November 2024 — above the 51-year average score of 98.

Meanwhile, the organization’s Uncertainty Index ticked upward by 14 points to sit at 100. This represents the third-highest recorded reading and follows two prior months of decline.

“Overall, small business owners remain optimistic regarding future business conditions, but uncertainty is on the rise,” said NFIB Chief Economist Bill Dunkelberg. “Hiring challenges continue to frustrate Main Street owners as they struggle to find qualified workers to fill their many open positions. Meanwhile, fewer plan capital investments as they prepare for the months ahead.”

Small Business Owners Point to Inflation, Labor Shortages as Particularly Pressing Issues

Diving deeper into the NFIB data, it becomes clear that American small business owners are particularly concerned over two major issues: persistent inflationary pressures and increasing labor shortages.

In fact, 18% of those polled said that inflation was the single largest problem facing their business, although this number was down by two percentage points from December’s results. The same number of respondents indicated that labor quality was their No. 1 concern as of January.

However, those same small business owners are increasingly skeptical — at least to some degree — over expectations of an improved economy. The number of those polled who expected as much fell by 5% to a net 47%, seasonally adjusted. A net 26% planned price increases in January, down two points from December.

A significant cohort (35%) of all owners reported job openings that they were unable to fill in the January period, a figure that was unchanged since December’s polling. And of those employers looking to fill positions (52%), a whopping 90% reported few or zero qualified applicants sending resumes their way in January.

According to the NFIB Jobs Report released just days earlier, the construction, transportation, and manufacturing sectors were hit hardest by the apparent labor shortages, skilled or unskilled, while the finance and agriculture sectors were struggling less, in comparative terms.

“Even though small-business optimism is finally brightening across the nation, states like ours always seem to do their best to turn the dimmer switch on what small progress is being made,” said Patrick Connor, state director of the NFIB in Washington. His remarks reference Senate Bill 5578 and House Bill 1764, which would increase the minimum wage to $25 an hour, mandate three weeks of paid vacation, and add five days of bereavement leave to all the other leave laws, according to 425 Business.

“Finding workers is difficult enough without the state trying to price positions out of existence altogether with higher and higher labor costs,” Connor added.

Former Goldman Sachs equity research analyst Carl Hazeley offered up his take on the NFIB report in a concise summary for Finimize.

“The drop in confidence reflects heightened anxiety, exacerbated by the U.S. president’s policy changes in his second term. That uncertainty is mirrored in the rebound of the uncertainty index to near-record levels, indicating skepticism towards current economic governance. Businesses, grappling with unclear fiscal policies, have reined in capital expenditures, adopting a wait-and-see approach,” Hazely wrote.