By Ethan Faverino |
Small business optimism edged lower in August as owners reported weaker sales, persistent inflation pressures, and continued difficulty finding qualified workers, according to the latest data from the National Federation of Independent Business (NFIB).
The NFIB Small Business Optimism Index fell to 98.7 in August, down 1.1 points from July’s highest reading since August 2025. Despite the decline, the index remained slightly above its 52-year average of 98.
NFIB’s Uncertainty Index also declined by two points to 89 but remained well above its historical average of 68, suggesting business owners continue to face questions about economic conditions and future investment.
“Uncertainty remains elevated among small business owners as they face a mixed set of challenges with weakened sales, supply chain disruptions, and inflation pressures,” said NFIB Chief Economist Bill Dunkelberg. “While expectations for the overall economy dimmed, Main Street owners remain largely positive in the health of their own businesses.”
In Arizona, NFIB State Director Chad Heinrich said small business owners are taking a cautious approach as they evaluate sales, hiring, and future investments.
“Arizona’s small business owners are cautious right now,” Heinrich said. “Sales are down, uncertainty is up, and owners are watching the economy closely before they commit to their next hire or investment.”
Heinrich also pointed to tax conformity measures approved by Arizona lawmakers this year, arguing that reducing tax-related uncertainty removes an additional obstacle for businesses considering expansion.
Nationally, sales showed signs of weakening during August. A seasonally adjusted net negative 9% of owners reported higher nominal sales during the previous three months, a five-point decline from July and the lowest reading since November 2025.
Expectations for better business conditions also fell five points to a net 10%, though the figure remained above the historical average of 4%.
Inflation became a greater concern during the month, with 16% of owners identifying it as their single most important problem, an increase of two points from July.
Inflation is now tied with taxes as the second-most frequently cited problem facing small businesses.
Supply chain issues also remain widespread. Sixty-two percent of small business owners said supply chain disruptions affected their operations to some degree, down only one point from July.
Despite those concerns, most owners continued to give their own businesses relatively positive remarks. Eleven percent rated the health of their business as excellent, while 57% described it as good. Another 28% rated conditions as fair, and 3% as poor.
Hiring conditions also softened in August, although businesses continue to report significant difficultly finding qualified workers.
The NFIB’s Small Business Employment Index declined 0.3 points to 101.8 but remained above the 2025 average of 101.2 and its historical average of 100.
Thirty-five percent of owners reported job openings they could not fill, one point lower than July but still 11 points above the historical average.
Among the 56% of businesses that were hiring or attempting to hire, 82% reported receiving few to no qualified applicants.
Thirty-one percent of owners reported openings for skilled workers, while 13% had openings for unskilled positions.
Hiring plans also cooled. A seasonally adjusted net 17% of owners said they plan to create new jobs over the next three months, down three points from July.
“Small businesses are slowing down their hiring efforts as the summer comes to an end, with fewer owners reporting job openings or plans to create new positions,” said Dunkelberg. “The pressure to offer competitive wages is still high, but it’s no longer a top challenge for most Main Street employers.”
Labor pressures nevertheless remain elevated compared with historical levels. Twenty-three percent of owners identified labor quality or availability as their top operating problem, down four points from July but 11 points above the historical average.
Labor costs, meanwhile, were identified as the top problem by 7% of owners, the lowest level since March 2021.
Compensation increases remained steady, with a seasonally adjusted net 31% of owners reporting they raised pay in August. A net 18% plan to increase compensation during the next three months.
The August figures present a mixed picture for small businesses heading into the fall: optimism remains slightly above its long-term average and most owners continue to view their individual businesses positively, but weaker sales, elevated uncertainty, inflation, and persistent hiring difficulties continue to weigh on Main Street.
Ethan Faverino is a reporter for AZ Free News. You can send him news tips using this link.
