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Friday, September 5, 2025

NFIB optimism index rises in July despite persistent labor quality concerns

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Angela Kornowski - Member Representative | LinkedIn

Angela Kornowski - Member Representative | LinkedIn

The NFIB Small Business Optimism Index increased by 1.7 points in July, reaching 100.3 and surpassing its 52-year average of 98. The rise was largely due to more business owners reporting improved business conditions and indicating that it is a good time to expand their operations. However, the Uncertainty Index also rose, up eight points from June to reach 97.

Labor quality emerged as the top concern for small business owners, with 21% identifying it as their main problem—an increase of five points since June.

“Optimism rose slightly in July with owners reporting more positive expectations on business conditions and expansion opportunities,” said NFIB Chief Economist Bill Dunkelberg. “While uncertainty is still high, the next six months will hopefully offer business owners more clarity, especially as owners see the results of Congress making the 20% Small Business Deduction permanent and the final shape of trade policy. Meanwhile, labor quality has become the top issue on Main Street again.”

Don Larson, NFIB North Dakota State Director, noted local impacts: “North Dakota’s small businesses are experiencing a slight uptick in optimism, but many owners still express concerns about the impact of inflation,” he said. “Congress making the 20% small business tax deduction permanent has helped boost confidence. North Dakota’s lawmakers and leaders must consider more ways to give our small businesses relief.”

Survey findings show an improvement in overall business health among respondents: 13% rated their business as excellent (up five points), while those rating their health as good rose three points to 52%. The share reporting fair or poor health declined.

Poor sales were cited by 11% of respondents as their biggest challenge—the highest level since February 2021. Owners expecting better business conditions jumped by a net 14 points to a seasonally adjusted net 36%, above historical averages. Sixteen percent reported it was a good time to expand (up five points).

Inflation remained a concern for some; eleven percent identified it as their main problem, unchanged from June and at its lowest point since September 2021.

Sales expectations dipped slightly: those anticipating higher real sales volumes fell one point from June to a net six percent (seasonally adjusted). Plans for capital outlays increased marginally but remain below long-term averages.

Hiring remains difficult for many firms. A seasonally adjusted third of all small business owners reported unfilled job openings in July—a drop from June but still above historical norms. Among those hiring or trying to hire in June, most found few or no qualified applicants available.

Planned job creation edged up slightly: a seasonally adjusted net fourteen percent plan new jobs within three months.

Reports of labor costs being the top problem fell one point to nine percent compared with June figures.

Compensation trends shifted downward; twenty-seven percent reported raising compensation (down six points), while seventeen percent plan further increases over three months (down two points).

Capital spending ticked upward: fifty-five percent reported expenditures over six months—five points higher than June—with equipment purchases leading these investments.

Recent sales performance showed challenges: a net negative nine percent reported higher nominal sales over three months (down four points). Inventory levels remained steady at a net negative eight percent; twelve percent increased stocks while seventeen percent reduced them.

Plans for price hikes eased somewhat but remain elevated relative to history—a signal that inflationary pressures persist even if actual price increases slowed from previous months.

Profit trends held steady at a net negative twenty-two percent (seasonally adjusted). Weak sales were blamed most often for lower profits; material costs and labor expenses were also cited frequently.

Financing issues affected few businesses; only four percent saw interest rates and access to credit as their main challenge—up slightly from last month—and just under one-quarter borrowed regularly.

Taxes ranked second among owner concerns at seventeen percent (down two points), followed by government regulations at eight percent and competition from large firms at six percent.

NFIB’s monthly survey draws randomly from its membership base and has tracked economic trends since the early 1970s through regular data collection cycles.

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