Why Small-Business Optimism Just Rose for the First Time in 5 Months
After five consecutive months of decline, small-business optimism in the U.S. has rebounded, signaling a potential turning point for the sector. According to the National Federation of Independent Business (NFIB) Small Business Optimism Index, the outlook among small business owners improved significantly in May 2025. The index rose by three points to 98.8, surpassing its 51-year average and marking its highest level in three months.
This uptick reverses a streak of pessimism that had been growing since the start of the year. Earlier in 2025, small business owners expressed heightened uncertainty about the economic climate, leading to a decline in the index. However, the May data suggests a shift in sentiment, with owners feeling more hopeful about future business conditions and sales.
The rebound was driven by improved expectations for sales and overall business conditions. A larger proportion of owners also reported that their current inventory levels were “too low,” reaching the highest level since August 2022. This surge suggests either rising demand or better inventory management practices.
Despite the positive trend, challenges remain. The NFIB’s Uncertainty Index increased by two points in May, indicating that business owners are still grappling with significant unknowns. Taxes emerged as the top concern, with 18% of respondents identifying them as their most pressing issue—the highest level since December 2020.
Labor shortages also continue to plague small businesses. In May, 34% of owners reported unfilled job openings, unchanged from April. Among those actively hiring, 86% struggled to find qualified applicants. The net percentage of owners planning to create new jobs dipped slightly to 12%, reflecting ongoing difficulties in expanding payrolls.
Looking ahead, the economic outlook remains mixed. NFIB Chief Economist Bill Dunkelberg noted that while optimism has improved, uncertainty remains a significant drag on recovery. Until major concerns—such as potential tax changes, regulatory shifts, and broader economic instability—are addressed, the small business economy is likely to “stumble along.”
Nevertheless, the latest data offers a glimmer of hope. Improved expectations for sales and business conditions suggest that small business owners are beginning to see light at the end of the tunnel. Whether this optimism translates into sustained growth will depend on how quickly these lingering uncertainties are resolved.
Read more about the NFIB survey and its implications for small businesses.
Recent Trends and the May Turnaround
After several months of declines, small business optimism in the United States has shown a marked rebound. According to the National Federation of Independent Business (NFIB) Small Business Optimism Index, the outlook among small business owners improved significantly in May 2025. The index rose by three points to 98.8, surpassing its 51-year average and marking its highest level in three months.
Key Drivers of Optimism
The uptick in optimism was fueled primarily by more positive expectations regarding business conditions and sales. Small business owners reported a brighter outlook for both, contributing the most to the index’s increase in May. The proportion of owners viewing their current inventory as “too low” also jumped, reaching the highest reading since August 2022. This was the largest single-month increase in the survey’s history, suggesting rising demand or improved inventory management.
Persistent Challenges and Uncertainty
Despite the improvement in optimism, significant challenges remain. The NFIB’s Uncertainty Index, a measure of how unsure business owners feel about future conditions, also increased by two points in May, highlighting that uncertainty is still notably high. Taxes emerged as the top concern, with 18% of small business owners identifying them as their most significant problem—the highest level recorded since December 2020.
Labor shortages continue to be a central issue. In May, 34% of small business owners had job openings they could not fill, unchanged from April. Among owners actively hiring, 86% reported finding few or no qualified applicants. The net percentage of owners planning to create new jobs in the next three months fell slightly to 12%.
Economic Outlook
NFIB Chief Economist Bill Dunkelberg summarized the current climate by noting that, even with the recent improvement in optimism, uncertainty remains a drag on the recovery. Until major sources of uncertainty—such as potential tax changes, regulatory shifts, and macroeconomic instability—are resolved, the small business economy is expected to “stumble along.”
Nevertheless, the latest survey indicates owners are starting to see light at the end of the tunnel, with better expectations for business conditions and sales growth.
Recent Index Movements
Prior to May’s increase, the Small Business Optimism Index had experienced a notable decline. In April, the index dropped by 1.6 points to 95.8, representing the second consecutive month of falling optimism and reflecting ongoing concerns about the broader economy and political climate. The Uncertainty Index also fluctuated in previous months, surging at times to near-record highs, as business owners weighed the impact of inflation, labor shortages, and tax uncertainty on their operations.
The broader context features continued issues with inflation—now the second most-cited concern after taxes and labor quality. This environment keeps expectations for expansion and hiring somewhat subdued, even amid the recent uptick in optimism.
Conclusion
The rebound in small-business optimism, as indicated by the NFIB Small Business Optimism Index rising to 98.8 in May 2025, signals a potential shift in the economic landscape for small businesses. Improved expectations for sales and business conditions, along with stronger inventory management, have contributed to this uptick. However, challenges such as tax concerns, labor shortages, and economic uncertainty continue to weigh on business owners’ confidence. While the recent data offers hope, sustained growth will depend on addressing these lingering issues and reducing uncertainty.
Frequently Asked Questions
What caused the recent rebound in small-business optimism?
The rebound was primarily driven by improved expectations for sales and business conditions, as well as stronger inventory management practices. A significant proportion of business owners reported their current inventory levels as “too low,” suggesting rising demand or better management.
What are the main challenges still facing small businesses?
Despite the optimism, small businesses continue to face challenges such as tax concerns, labor shortages, and economic uncertainty. Taxes emerged as the top concern, with 18% of respondents identifying them as their most pressing issue. Labor shortages also persist, with 34% of owners reporting unfilled job openings.
What does the economic outlook look like for small businesses?
The economic outlook remains mixed. While optimism has improved, uncertainty remains a significant drag on recovery. NFIB Chief Economist Bill Dunkelberg noted that until major concerns like tax changes, regulatory shifts, and macroeconomic instability are addressed, the small business economy is likely to “stumble along.”
How significant is the rise in the NFIB Small Business Optimism Index?
The index rose by three points to 98.8 in May 2025, surpassing its 51-year average and marking its highest level in three months. This rise indicates a shift in sentiment, with business owners feeling more hopeful about future conditions and sales.
What does the increase in the Uncertainty Index mean for small businesses?
The Uncertainty Index increased by two points in May, highlighting that business owners are still grappling with significant unknowns. This uncertainty is likely to act as a drag on recovery until major concerns such as tax changes, regulatory shifts, and broader economic instability are resolved.
How can small businesses address the lingering uncertainties?
Small businesses can address lingering uncertainties by staying informed about potential tax changes, regulatory shifts, and broader economic trends. Improving inventory management, adapting to labor shortages, and maintaining flexibility in business operations can also help navigate the current economic climate.