Small business sentiment is down again as uncertainty persists

Consumer confidence has regularly been reported as trending down in the face of rising prices, high borrowing costs, and policy uncertainty from the Trump administration on tariffs, U.S. Federal Reserve independence, and war in the Middle East. But small business confidence is also down.

The National Federation of Independent Business (NFIB) released its February Small Business Optimism Index on Tuesday, and it’s down for a second straight month — though it has rebounded from the sharp dive it took last April, after President Donald Trump’s so-called Liberation Day tariffs were announced.

The index for February is just about average for the past 52 years it’s been compiled. But one component of sentiment is running much higher than it has for decades — business uncertainty.

Holly Wade, executive director of NFIB’s Research Center, said small business owners have plenty to be worried about.

“Inflation is still a pain point for many small business owners,” she said. “The labor market. A large share are looking to hire, can’t find applicants.”

Costs are up for the materials many small businesses need to buy, in part because of last year’s tariffs. And the war with Iran is a big, new unknown.  

“We have seen in the past: the price of a barrel of oil increases, they are saddled with higher-cost gasoline, fuel oil. They do pull back,” Wade said.

The labor market is also throwing curveballs.

Wade said health insurance costs have escalated over the last year. Small business premiums are up 11% for 2026, nearly double the increase for businesses overall.

Meanwhile, there is increasing evidence that small businesses have expanded their hiring.

Aaron Terrazas, an economist at payroll processor Gusto — which is a Marketplace underwriter — said small businesses added nearly 106,000 net new jobs in February. That’s double the 12-month average, which he said is a sign that “uncertainty paralysis” may be diminishing.

“In some ways, small businesses were first to be rattled by all the economic uncertainty last spring. But they’ve also been a lot quicker to adjust,” Terrazas said.

Those businesses are now heading into 2026 with a bit more confidence than their larger counterparts.