U.S. NFIB Small Business Optimism Index (October 2025)

Small Business Optimism takes a small step back in October

• The NFIB's Small Business Optimism Index fell by 0.6 points to 98.2 in October, staying a hair above its long-term average of 98. The uncertainty index pulled back 12 points to 88 – the lowest reading of the year, but still historically elevated. 
• Five out of ten subcomponents fell on the month, four improved, and one remained unchanged. The largest pullback was in earnings trends (-9 points to -25%), which was accompanied by a notable decline in the share of firms reporting higher nominal sales this quarter (-6 points to -13%).  Plans to increase inventories (-2%) and expectations for an improvement in the economy (20%) also fell 3 points each.
• Labor market indicators were mixed. The average change in employment per firm was negative for the fifth month in a row. The net share of businesses planning to increase employment fell one point to 15% – the first decline since hiring plans started to increase in May 2025. Meanwhile, the share of firms with unfilled job openings remained unchanged at 32% for the third month in a row – well off pandemic highs of around 50%, but still an elevated level historically. 
• Quality of labor concerns shot up 9 points, with 27% of business owners identifying this as their top business problem – leaving other concerns such as taxes (-2 points to 16%) and inflation (-2 points to 12%) well behind. Meanwhile, the share of firms reporting "few or no qualified workers for job openings" eased one point to 49%, following a 7-point increase in the month prior. Despite concerns about labor quality, compensation metrics eased.
• Turning to price metrics, the share of businesses 'raising' average selling prices fell 3 points to 21%, while the share of firms 'planning’ to raise average selling prices ahead fell 1 point to 30%.

Key Implications

• Small business optimism managed to remain just above its long-term average, despite a slight decline in October. This occurred as smaller firms reported lower sales and reduced earnings – indicators that don't bode well for consumer spending, which has likely been weighed down by the ongoing government shutdown. On a more positive note, small business inflation indicators showed modest improvement, while labor market metrics largely held their own.  
• The NFIB employment indicators reinforced the "low hire, low fire" theme. While there was little progress on the hiring front in October, there was also no significant drop in demand for workers. In fact, with job openings steady and plans to increase employment only slightly lower, the surge in concerns about the quality of labor suggests that for now businesses remain focused on filling open positions rather than reducing headcount.          

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