Small business owners 'increasingly pessimistic,' squeezed by higher costs, labor concerns

May 12, 2026 - 20:56

Optimism among small business owners showed no improvement last month, with a key index remaining stuck below its long-term average for the second consecutive month. The National Federation of Independent Business reported that its monthly survey of small business sentiment held steady, but the lack of upward movement signals deepening concerns among entrepreneurs.

The flat reading masks a growing sense of pessimism as owners face relentless pressure from rising costs and persistent labor shortages. Inflation continues to eat into profit margins, with many reporting that they cannot fully pass on higher expenses to customers. At the same time, finding qualified workers remains a major headache, forcing some businesses to cut hours or reduce services.

According to the NFIB data, a significant share of owners now view the current period as a bad time to expand, citing economic uncertainty and regulatory burdens. The index has now spent two months below the 50-year average, a threshold that historically points to a sluggish business climate.

The combination of squeezed margins and hiring difficulties is taking a toll on plans for growth. Fewer owners expect better business conditions in the coming months, and capital spending intentions have softened. While the broader economy shows mixed signals, the small business sector appears to be bracing for a prolonged stretch of headwinds.