Small-Business Hiring Cools as NFIB Index Slips to 101.8

Small-business owners pulled back on hiring in August, with the NFIB Employment Index slipping 0.3 points to 101.8 and the share planning new positions dropping 3 points, the clearest sign yet that the US labor market is decelerating from its summer pace.

"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 Bill Dunkelberg, chief economist at the National Federation of Independent Business. "The pressure to offer competitive wages is still high, but it's no longer a top challenge for most Main Street employers."

A seasonally adjusted net 17 percent of owners plan to create new jobs over the next three months, down from July's reading, which was the highest since October 2022. Unfilled job openings fell 1 point to 35 percent, still 11 points above the historical average. The share of owners citing labor quality or availability as their single most important problem dropped 4 points to 23 percent, 11 points above the 12 percent historical average. Labor costs as the top problem fell to 7 percent, the lowest since March 2021.

The index remains slightly above the 2025 average of 101.2 and the historical average of 100.0, showing that the small-firm job market is still healthy by historical standards even as it cools. Fifty-six percent of owners reported hiring or trying to hire in August, down 5 points from July. Of those, 47 percent — or 82 percent of hiring owners — said they found few or no qualified applicants, with 29 percent reporting few qualified candidates and 18 percent reporting none. Skilled-worker openings held at 31 percent, while unskilled-labor openings slipped 1 point to 13 percent.

Compensation measures showed little change. A seasonally adjusted net 31 percent of owners reported raising compensation, unchanged from July, while a net 18 percent plan to raise pay in the next three months, down 1 point. Both actual and planned compensation measures remain above their historical averages, suggesting wage pressure has not fully dissipated even as hiring demand softens.

The NFIB survey, which tracks roughly 275,000 small businesses, serves as a leading indicator for the broader labor market. Small firms account for nearly half of US private-sector employment, so their hiring decisions tend to foreshadow trends in the national payroll data. The August reading suggests small-firm demand for workers is decelerating even as the worker shortage remains historically acute. That dynamic — easing demand against still-tight supply — will be tested when the national employment report lands in the coming weeks.

Regional disparities persist. "It looks like we may have missed our opportunity this summer to dig our way out of Oregon's worst-in-the-nation unemployment rate," said Anthony Smith, state director for NFIB in Oregon. "Every state has to deal with the same national and international economic conditions, but Oregon is clearly falling short where other states are prospering."

For the Federal Reserve, the trajectory matters. The NFIB data arrives as policymakers weigh whether the labor market is cooling enough to warrant further rate cuts or stabilizing at a level consistent with a soft landing. If national jobs data confirms the small-business cooling, it would reinforce the case for continued policy easing. If payrolls remain firm despite softer small-firm hiring, the divergence would complicate the Fed's read on labor market conditions. Either way, the NFIB data adds to a picture of a labor market gradually normalizing after two years of historically tight conditions, with the August reading marking the first sustained pullback in small-firm hiring since the spring.

This article is for informational purposes only and does not constitute investment advice.