Small business optimism sees a slight uptick, as the latest NFIB Small Business Optimism Index reveals encouraging signals for the economy. The Index rose 0.5 points to 100.8 in August, marking a nearly three-point increase from the 52-year average of 98. This positive shift comes against a backdrop of fluctuating economic sentiments, demonstrating resilience in the small business sector.

Key Findings and Implications

The optimism among small business owners is primarily driven by enhanced expectations for real sales. A notable 12% of owners now anticipate higher sales volumes, up 6 points from July, significantly contributing to the Index’s rise. Bill Dunkelberg, Chief Economist at NFIB, remarks, “Optimism increased slightly in August with more owners reporting stronger sales expectations and improved earnings.” However, he cautions that labor quality remains a pressing concern, with 21% citing it as the top issue faced on Main Street.

Business health also appears to be improving. In August, 14% of owners rated their business as excellent (up 1 point), while 54% considered it good (up 2 points). Conversely, 27% regarded their business health as fair (down 4 points), and 4% reported poor conditions, unchanged from previous months.

Job Listings and Labor Market Dynamics

Despite the optimism, the labor market remains a challenging landscape. About 32% of small business owners reported unfilled job openings, down slightly from July. This is significant, as it marks the first time unfilled openings dipped below 32% since July 2020.

“Labor quality” continues to top the list of concerns for small business owners, reflecting the ongoing struggle to find skilled workers. The construction, manufacturing, and transportation sectors report acute difficulties in filling essential roles, with nearly half of construction businesses unable to secure necessary labor.

While 15% of owners plan to create new jobs in the coming months—an encouraging trend—the overall job creation intentions remain historically low. Of the owners actively hiring, 81% indicate few or no qualified applicants, highlighting the critical talent gap faced by many industries.

Financial Trends

On the financial front, there are mixed signals. The average rate on short maturity loans has decreased to 8.1%, the lowest since May 2023, potentially easing some borrowing costs for business owners. However, only 23% of owners reported borrowing regularly—down from previous months—suggesting a possible hesitance in pursuing financing.

Interestingly, while a net 29% of owners have reported raising employee compensation, inflation concerns remain prevalent. Eleven percent identify inflation as their primary operational challenge, pointing to ongoing pressure from rising input costs.

Looking Ahead

Small business owners are generally planning cautiously for the next three months. A net 26% intend to increase prices, a slight decrease from July, while the percentage of owners raising average selling prices has also dipped—indicative of the broader economic hesitance.

Despite these challenges, more than half of small business owners (54%) have indicated that supply chain disruptions are impacting their operations, although this is a notable decline from previous months.

Ultimately, as the NFIB Small Business Optimism Index highlights a complex mix of optimism and ongoing challenges, small business owners are urged to evaluate their operations critically. The key takeaway from this month’s survey is clear: while there are signs of improvement in sales expectations and business health, significant roadblocks—especially in the labor market and inflationary pressures—are still in play.

For more detailed insights, you can view the complete NFIB survey results here.

This article, “Small Business Optimism Rises Slightly Amid Ongoing Labor Concerns” was first published on Small Business Trends