NFIB: Small Business Optimism Rebounds on Sales Hopes, Hiring Slack

The labor market tells a more complicated story. The share of firms reporting hard-to-fill job openings rose 3 points to 32%. The net share planning to increase employment climbed 2 points to 11%. Yet 51% of firms that are hiring or trying to hire reported few or no qualified applicants, the highest share since September 2024. Nineteen percent cited labor quality or availability as their single most important problem. Hiring activity remains subdued compared with levels through much of last year.

Inflation pressures are building again. The net share of firms raising average selling prices increased 2 points to 38%, the highest reading since early 2023 and the fourth consecutive monthly increase. Twenty-one percent of owners cited inflation as their most important business problem, up 3 points from May. On the positive side, the share of firms planning to raise prices over the next three months declined slightly to 32%, suggesting some easing in forward-looking price pressure, economists noted.

Earnings trends deteriorated further. Reduced plans to build inventories and slightly more pessimistic views on future credit conditions offset some of the headline gains.

For the broader economy, the data paints a picture of improving expectations with persistent cost and labor constraints. The labor backdrop looks more supply-constrained than demand-driven, with firms reporting fewer qualified applicants even as compensation pressures cooled. TD Bank economists said elevated borrowing costs and persistent cost pressures are likely to remain constraints for small business activity through the second half of the year. The report offers no clear signal for the Fed: the improvement in sentiment and the pickup in price hikes support the case for holding rates steady, while the labor constraints suggest the economy is not overheating.