Small business optimism steady as uncertainty rises in January

Small business optimism held steady in January even as uncertainty climbed, according to the latest Small Business Economic Trends report from the National Federation of Independent Business (NFIB).

The January survey introduced a new measure to better reflect labor market conditions for small employers. The new Small Business Employment Index registered 101.6, above the historical average of 100, signaling a balanced small business job market. The index combines multiple employment and compensation data points collected over the past 40 years to provide a broader view of hiring trends.

Overall optimism dipped slightly, falling 0.2 points to 99.3. Despite the marginal decline, the reading remains above the 52-year average of 98, suggesting that many owners still view current conditions as stable heading into the year.

However, the Uncertainty Index rose sharply by seven points. A growing share of owners reported uncertainty about whether it is a good time to expand, which drove much of the increase. For entrepreneurs considering hiring, investing in equipment or opening new locations, that hesitation reflects caution about the broader economic outlook.

Costs continue to pressure small firms. Thirteen percent of owners identified the cost or availability of insurance as their single most important problem, up four points from the previous month. That marks the highest share citing insurance concerns since December 2018. At the same time, labor quality, as the top issue, declined for the third consecutive month, dropping three points since December, suggesting that hiring challenges may be easing slightly.

For small to midsize business owners, the January data points to a labor market that remains stable, but with rising caution around expansion and ongoing cost pressures that could influence hiring and investment decisions in the months ahead.