U.S. Small Business Confidence Rises to 11-Month High in July; Labor Shortage Emerges as Top Concern
Alina Collins
The NFIB small-business optimism index rose to 99.8 in July — an 11-month high — with hiring plans jumping to the strongest since late 2022, yet 36% of owners reported unfilled job openings. Labor shortage has overtaken inflation as small businesses' single biggest problem.
Confidence at an 11-month high — doesn't that clash with last week's payrolls miss?
The July optimism index rose 2.4 points to 99.8, topping the survey's 52-year historical average of 98.0 and hitting its highest since August 2025.
Last week's non-farm payrolls came in weaker than expected, sparking slowdown fears. This confidence rebound suggests the jobs miss was more likely a one-off blip than a turning point.
This means → the two data sets tell different stories: large firms may be pulling back, but small businesses still want to expand.
How eager are small businesses to hire?
The share of owners planning to add jobs in the next three months jumped 9 percentage points to 20% — the highest since October 2022.
The employment sub-index rebounded 1.9 points to 102.1 after four straight months of decline.
In plain terms = owners aren't just talking about hiring — they are opening positions and raising budgets. This is the strongest hiring impulse in nearly three years.
They want to hire but can't fill the jobs — what's going wrong?
The share of owners with unfilled openings rose to 36%, the highest since June 2025, spanning both skilled and unskilled positions.
NFIB chief economist Bill Dunkelberg pointed to a labor force that has shrunk by more than one million this year, driven by retirements and the Trump administration's large-scale crackdown on undocumented immigrants.
This means → the bottleneck is not employer willingness to pay — it is that the pool of available workers keeps getting smaller. With hundreds of thousands of immigrants losing protected status, the gap is still widening.
How severe is the labor shortage — is it really the number-one problem now?
27% of owners named labor quality or availability as their single most important problem in July, far above the 12% historical average.
Some owners said they "simply cannot find qualified applicants for skilled positions"; others reported that "it is getting harder across every industry to find quality workers."
This reflects a regime shift: labor shortage has displaced inflation as the top concern — the share citing inflation as the primary problem fell 7 percentage points to 14%, its first decline this year.
If confidence is up, why are businesses still hesitant to expand?
The uncertainty index rose 2 points to 91; some owners said they were unsure whether now is the right time to expand, and capital-spending plans remained on hold.
Dunkelberg attributed the elevated uncertainty to "the direction of war with Iran," adding that "a meaningful resolution would be a major positive for the economy and small-business owners."
In plain terms = confidence and action are separated by a layer of uncertainty. Owners feel business is solid, but geopolitical risk is keeping capital on the sidelines.
What data should we watch next?
The core tension is now clear: hiring intent at a three-year high vs. a labor supply that keeps shrinking.
This means → if the labor gap doesn't ease, employment data may continue to undershoot employer demand, and wage pressure could re-emerge.
The next non-farm payrolls report is the key test: whether labor shortage is materially holding back the jobs recovery.
Content is for reference only, not financial advice.