Daily Briefing 3/12/25
Small Business Optimism Survey (NFIB)
In February 2025, the NFIB Small Business Optimism Index fell by 2.1 points to 100.7, marking a decline but still staying above the 51-year average of 98 for the fourth consecutive month. Despite this relative strength, the drop suggests a cooling of confidence among small business owners. Meanwhile, the Uncertainty Index rose four points to 104, reaching its second-highest recorded level, highlighting increasing apprehension about future business conditions and economic stability.
Interpretation
February’s index decline signals a growing loss of momentum, particularly in its details. The sharp drop in economic expectations - down 10 points - suggests that the late-2024 optimism surge is fading. The percentage of business owners seeing the current period as a good time to expand also fell significantly, by five points, the largest drop since the onset of the COVID-19 crisis in April 2020. This reflects a broader hesitancy to invest and grow, which importantly could have implications for small business-driven employment growth.
Interestingly, price expectations concerns have diminished, dropping to their lowest level since October 2021. For the first time in years, “inflation” is no longer the top concern among independent operators, having been overtaken by labor quality issues. However, this shift does not indicate a robust labor market. Rather, it highlights the growing mismatch between employer expectations and available workers. Many business owners cite difficulties in finding suitable employees, but this often stems from their inability to offer competitive wages.
Uncertainty is another dominant theme. The NFIB Uncertainty Index surged to 104, the second-highest reading in its history. This heightened uncertainty is not unique to small businesses, major industries such as airlines and retail face similar sentiment. With unclear economic signals and a shifting (global) macroeconomic environment, businesses are struggling to form concrete strategies for the months ahead.
The pricing dynamics are also worth noting. Despite easing price expectations concerns, price hikes remain prevalent, with the net percentage of owners raising prices jumping 10 points. This indicates an expectation for tariff-induced changes.
Overall, the report portrays a small business sector coming back from its post-election frenzy. While still holding above long-term averages, confidence is wavering, investment hesitancy is growing, and labor-related concerns are taking center stage.
