According to the National Federation of Independent Business (NFIB), small business optimism has taken a decisive blow for another consecutive month. The organization’s Small Business Optimism Index dropped 3.3 points from 100.7 to 97.4, just below the 51-year average 98. In addition, The Uncertainty Index declined by eight points from February’s second-highest reading to 96. Small business optimism is a key indicator of the health of the economy, and the bleak results of the survey are a telling reflection of the ongoing challenges small business owners face as uncertainty increases around new policy changes and economic conditions.
The survey found that taxes ranked as the single most critical concern of small business owners, increasing by two points from February to 18%. In addition, the net percentage of business owners expecting better business conditions dropped a staggering 16 points to 21%, marking the third consecutive monthly decline. Labor quality remains a significant issue, with the number of owners reporting it as their top concern at 19%. Even more shockingly, the net percentage of owners anticipating higher real sales volumes decreased by a staggering 11 points, continuing a three-month decline.
Many small business owners cited the labor market and its conditions as a significant pain point. 19% of small business owners cited labor quality as their most pressing issue. Of the 53% of owners attempting to fill roles, 87% reported few to no qualified applications in the talent pool. This is especially concerning as 40% of owners reported job openings they cannot fill, a two-point increase from February. Only 12% of owners plan to create new jobs within the next three months, a three-point decline from last month.
In addition to the labor market concerns, the economic pressures are impacting small business owners. Roughly 16% of small business owners cite inflation as their most pressing issue. However, this issue dropped from being the second-largest concern last month. The net percentage of owners raising average selling prices decreased to 26%, the most significant monthly drop since December 2022, though still high historically. 59% of owners reported capital expenditures in the last six months, with many investing in new equipment or vehicles.
Some small business owners are finding it increasingly challenging to secure financing for their businesses. 6% of owners reported that their most recent loan was more difficult to obtain, marking the most significant increase since September 2023. 28% of small business owners have to borrow regularly, a rise from February’s low point. In addition, seeking funding is starting to cost business owners more, with 4% of owners reporting paying higher interest rates on their latest loans.
When questioned about the health of their business, 11% of small business owners rated their business’ health as excellent, 53% as good, 31% as fair, and 4% as poor. Only 9% of the surveyed business owners believe it is a good time to expand their business, reflecting a steep decline in confidence.
The March NFIB survey paints a sobering picture of small business sentiment, with rising concerns about taxes, labor quality, and slowing sales expectations. As economic uncertainty persists and access to financing becomes more challenging, small business owners are increasingly cautious about growth and investment.
