Small Business Optimism Hits 99.8 as Hiring Plans Jump

The NFIB Small Business Optimism Index rose 2.4 points to 99.8 in July, the highest reading since August 2025 and above the index's 52-year average of 98.0, driven by a sharp pickup in hiring intentions.

"Small business optimism rose again in July, with a significant increase in owners expecting to hire, accompanied by an improvement in plans to make capital expenditures," said Bill Dunkelberg, chief economist at the National Federation of Independent Business. "Although uncertainty is currently elevated, Main Street anticipates that business conditions will continue to improve."

The July reading beat the consensus forecast of 97.5 from economists polled by The Wall Street Journal and marked the second consecutive monthly gain. Eight of the index's 10 components improved, with hiring plans contributing the most. A net 20 percent of owners said they plan to create new jobs over the next three months, up 9 points from June and the highest level since October 2022. The NFIB Small Business Employment Index rose to 102.1, rebounding after four consecutive months of declines.

The improvement signals that Main Street is increasingly willing to expand payrolls and invest in capacity, a positive for the broader labor market as the Federal Reserve weighs its next policy move. However, the NFIB Uncertainty Index rose 2 points to 91, well above its historical average of 68, suggesting owners remain cautious about the medium-term outlook.

The pickup in hiring intentions was accompanied by a notable easing in price pressures. The net share of owners raising average selling prices fell 7 points to a net 31 percent, while a net 28 percent plan to increase prices, down 4 points from June. Real sales expectations and reports of inventory levels as "too low" each fell 2 points, suggesting owners are tempering expectations for near-term demand growth even as they expand workforces.

Labor quality and availability remained the top reported issue for small business owners, reflecting persistent challenges in finding suitable workers. These labor shortages can place upward pressure on wages and operating costs, potentially limiting the ability of businesses to respond to stronger demand.

Capital Expenditure Plans Strengthen

Plans for capital expenditures also improved in July, supporting the broader increase in optimism. Greater willingness to invest is significant because capital spending decisions tend to reflect business owners' expectations about future economic conditions. An increase in investment plans suggests more businesses are becoming comfortable committing resources to expansion, equipment, and other productive capacity.

The last time the optimism index reached this level in August 2025, the U.S. economy was coming off a period of resilient consumer spending and moderating inflation. Since then, the index has fluctuated between the mid-90s and 99.8, tracking the uneven path of the broader recovery.

Uncertainty Remains Elevated

Despite the improvement in the headline index, the NFIB Uncertainty Index rose 2 points to 91, remaining well above its historical average of 68. The increase was driven primarily by more owners expressing uncertainty about whether it is a good time to expand and by changes in capital expenditure plans.

The divergence between rising optimism and elevated uncertainty suggests small business owners are more confident about near-term conditions but remain cautious about the medium-term outlook. This tension could influence how aggressively businesses pursue expansion plans in the coming quarters.

For the broader economy, the NFIB data adds to a picture of gradual improvement in the small business sector, which employs nearly half of all U.S. private-sector workers. If hiring plans translate into actual job creation, it could provide additional support to the labor market and consumer spending in the second half of 2026.

This article is for informational purposes only and does not constitute investment advice.