Labor costs, inflation hurt small business optimism in May
The state of the economy is continuing to impact the optimism of small business owners.
The National Federation of Independent Business (NFIB) Small Business Optimism Index fell 0.6 points in May to 95.3, remaining below its 52-year average of 98.0. The group's Uncertainty Index rose 3 points from April to 91, remaining well above its historical average of 68.
The NFIB Small Business Employment Index remained essentially flat, registering 100.3 in May. The current reading was below the 2025 average of 101.2 but still slightly above the historical average of 100.0. In May, a seasonally adjusted 29% of small business owners reported job openings they could not fill in May, down 5 points from April and marking the lowest level since May 2020.
“AI investment spending has contributed to some excitement in the economy,” said NFIB chief economist Bill Dunkelberg. “Despite the enthusiasm around AI, the overall picture is divided. More small business owners are struggling with significant and unpredictable hikes in fuel prices, which are more challenging for small businesses to pass on to their customers compared to their larger corporate competitors.”
Fourteen percent of business owners reported labor costs as their single most important problem, up 5 points from April and the highest reading in the survey’s history. In May, NFIB noted that 13% of small business owners cited labor quality as their single most important problem, down 5 points from April and marking the lowest level since December 2016.
[READ MORE: Fiserv: Small business retail sales see slight dip in May]
Nearly one-in-five (18%) business owners cited inflation as their single most important business problem, up 2 points from April and marking the highest reading since December 2024.
Sixteen percent (seasonally adjusted) of small business owners plan to make capital outlays in the next six months, down 1 point from April and the lowest level since March 2009.
Methodology
The NFIB Research Center has collected Small Business Economic Trends data with quarterly surveys since the fourth quarter of 1973 and monthly surveys since 1986. Survey respondents are randomly drawn from NFIB’s membership. The report is released on the second Tuesday of each month. This survey was conducted in May 2026.
