Small Business Optimism Hits Three-Month High Heading Into 2026 as Uncertainty Clouds Ease

After a year defined by economic whiplash, America's small business owners are entering 2026 with cautious optimism. The National Federation of Independent Business (NFIB) Small Business Optimism Index rose to 99 in November 2025—its highest reading in three months—beating economist expectations and suggesting that the nation's entrepreneurial backbone sees steadier conditions ahead.

Breaking Down the Numbers

The index's climb to 99, up from 98.2 in October and above forecasts of 98.4, reflects improvement across several key metrics. The net percentage of owners expecting higher real sales volumes jumped 9 points to a net 15%—a notable shift in sentiment after months of caution.

Hiring intentions also improved. The net share of businesses planning to increase employment rose 4 points to 19%, reaching its highest level since December 2024. While actual hiring remained subdued—the average change in employment per firm stayed negative for the sixth consecutive month—the forward-looking indicators suggest small businesses are preparing to expand their workforces.

"Uncertainties will hopefully soon be resolved, and small business owners will feel more confident in making decisions about their business going into 2026."

— Bill Dunkelberg, NFIB Chief Economist

Labor: The Persistent Challenge

Finding qualified workers remains the most significant obstacle facing small business owners. A striking 89% of those hiring or attempting to hire in November reported receiving few or no qualified applications to fill vacant positions. One-third of all owners said they had openings they simply could not fill.

This labor market tightness creates a complex dynamic. On one hand, it's a sign of economic health—workers have options and can be selective. On the other hand, it constrains growth for businesses that can't execute expansion plans without additional staff.

The Federal Reserve's current median projection for unemployment is 4.4% by the end of 2026, suggesting labor markets will remain competitive for employers. Small businesses, which often can't match the wages and benefits offered by larger corporations, face particular difficulty in this environment.

Inflation Pressures Resurface

One concerning element in the November data: pricing pressures are building again. The net percentage of owners raising average selling prices rose 13 points to a net 34%—the highest reading since March 2023.

This suggests that despite the Federal Reserve's rate cuts, inflationary forces haven't fully dissipated. Small businesses are passing along higher costs to customers, which could complicate the Fed's efforts to bring inflation back to its 2% target and potentially influence the pace of future rate reductions.

Mixed Signals on the Economy

Not all indicators pointed upward. Small businesses felt more pessimistic about the broader economy, with sentiment on economic conditions declining 5 points. Future credit conditions also drew concern, dropping 2 points as owners worry about financing availability.

Plans for capital outlays in the next six months declined 3 points, suggesting businesses remain hesitant to make major investments despite the overall uptick in optimism. This caution reflects the uncertainty that has characterized the past year—business owners want to see more consistent signals before committing significant resources.

What 2026 Might Bring

Following a year that brought election uncertainty, fluctuating interest rates, and persistent inflation, small business owners hope 2026 delivers more predictable conditions. Several factors could influence their outlook:

Interest rate trajectory: The Fed has signaled a more gradual pace of rate cuts in 2026, but even modest reductions could ease borrowing costs for businesses looking to expand or refinance debt.

Policy clarity: With the new administration settling in, businesses should gain clarity on trade policy, regulations, and tax treatment that affects their planning.

Consumer spending: The health of small businesses ultimately depends on consumer demand. If households continue spending despite high prices, revenue growth could support business expansion.

Sector Variations

Optimism levels vary considerably by industry. Service businesses—particularly those in professional services, healthcare, and technology—report relatively stronger conditions. Retail and hospitality businesses face more headwinds as consumer spending patterns shift.

Construction-related small businesses express particular uncertainty given elevated interest rates and questions about housing market direction. The sector has benefited from residential renovation activity but faces potential slowdowns if homeowners grow more cautious.

The Labor Shortage Solution

Some small businesses are finding creative ways to address workforce challenges. Increased automation, flexible work arrangements, and partnerships with local training programs have helped certain employers attract candidates.

Others are raising wages and benefits despite the impact on margins—recognizing that the cost of unfilled positions often exceeds the cost of higher compensation. The businesses successfully navigating the labor shortage tend to share common traits: clear communication of company culture, investment in employee development, and willingness to adapt traditional hiring criteria.

What It Means for the Broader Economy

Small businesses employ nearly half of America's private workforce, making their collective sentiment an important economic indicator. Rising optimism suggests these employers see opportunities ahead—even if they're proceeding carefully given recent volatility.

The NFIB data also carries implications for monetary policy. The Federal Reserve watches small business surveys closely for signals about inflation, hiring, and economic momentum. The combination of improved optimism, hiring intentions, and pricing pressures presents a complicated picture that may influence the pace of future rate decisions.

Looking Ahead

The next few months will test whether November's optimism uptick represents a sustainable trend or a temporary bounce. Key data points to watch include the January employment report, consumer confidence readings, and any policy announcements from the new administration that affect small business operations.

For now, America's entrepreneurs are approaching 2026 with measured hope—convinced that better days are possible while remaining prepared for the unexpected. After years of pandemic disruption, supply chain chaos, and economic uncertainty, that pragmatic optimism may be exactly what the economy needs.