The NFIB small business optimism index remains in a narrow range around the 52-year average of 98 for the eighth month in a row. The December index is up 0.5 point to 99.5 and is a near match to the consensus of 99.4 in the Econoday survey of forecasters. However, the NFIB survey was taken in December and does not reflect current geopolitical events and the subpoena the Trump Department of Justice sent to the Federal Reserve regarding the cost of renovations to the Fed headquarters in Washington, DC.

The uncertainty index dips 7 points to 84 in December from 91 in November but is similar to 86 in December 2024. While declining uncertainty is a positive for small businesses, the level remains elevated and will probably jump higher again in the January data when that report is released on Tuesday, February 10 at 6:00 ET.

There was overall little change in the index components in December with two higher, three lower, and five unchanged. The largest increase was 9 points to 24 percent in expectations for the economy to improve. The largest decrease was 5 points to 10 percent in expectations for higher sales.

The index components related to the labor market shows current job openings unchanged at 33 percent in December and plans to increase employment down 2 points to 17 percent. The subcomponent for the availability of qualified applicants is down 2 points to 48 percent in December but remains consistent with difficulty in finding workers with the right skills and/or experience. The subcomponent for planned compensation is unchanged at 24 percent in December from November. However, the subcomponent for actual compensation is up 5 points to 31 percent in December.

Among survey respondents, 21 percent cite quality of labor as their single most important problem in November. Small businesses face competition from bigger companies in attracting and retaining workers with the right skills and/or experience.

Among NFIB survey respondents in December 20 percent cite taxes as their single most important problem. This is unsurprising at the close of the year and just before tax season starts in January. The second most important problem cited is quality of labor at 19 percent in December.

The consensus looks for the index up again to 99.4 in December from 99.0 in November and 98.2 in October.

The small business optimism index is compiled from a survey that is conducted each month by the National Federation of Independent Business (NFIB) of its members. The index is a composite of 10 seasonally adjusted components based on the following questions: plans to increase employment, plans to make capital outlays, plans to increase inventories, expect economy to improve, expect real sales higher, current inventory, current job openings, expected credit conditions, now a good time to expand, and earnings trend.

Small businesses are responsible for a majority of new job creation and the NFIB focuses on this sector of the economy. The direction of the health of small businesses can portend changes in the stock market - especially small caps.