Economic Reports: Small Business Optimism and New Business Formation

Small business owners felt a bit more upbeat in July. Many reported seeing better business conditions and felt more confident about growing their companies. Still, worries about uncertainty and finding good workers continued, according to the latest NFIB survey. The NFIB’s Small Business Optimism Index rose 1.7 points to 100.3, pushing it above its long-term average and reaching a five-month high. News outlets like Reuters and Bloomberg confirmed the boost, highlighting stronger expectations for the economy even as the Uncertainty Index also climbed. More business owners now believe it’s a good time to expand, but labor quality remains the top challenge.

Small business optimism

The NFIB report showed that six out of ten key measures improved, led by a big jump in optimism about the economy and more owners saying it’s a good time to expand. Both are now well above typical levels. Even with this optimism, uncertainty also increased, with the Uncertainty Index rising eight points to 97. About one in five owners said finding qualified workers is still their biggest headache. This shows hiring is still tough, even though there are fewer open positions. News coverage emphasized the five-month high in optimism but also pointed out that policy and cost pressures are still making the outlook uncertain.

New business applications and formations

New business creation stayed strong by recent standards. In May, there were 446,993 business applications, according to the Census Bureau’s Business Formation Statistics. That’s just a tiny dip of 0.6% from April, so activity remains high. The number of projected new employer businesses over the next year didn’t really change. The Census Bureau’s BFS program, which is updated monthly and tracked in FRED, gives a clear picture of overall applications and what to expect for new employer startups. A recent release highlighted the wide reach of the BFS data across the country, as well as its work with Federal Reserve economists and academic experts.

Entrepreneurship indicators

Alongside official data, the Kauffman Indicators of Entrepreneurship provide a broader look at early-stage business activity. These indicators track how many people are becoming entrepreneurs and how many new businesses are getting off the ground. Using data from the Census and BLS, Kauffman helps map out the journey from business application to hiring employees. Kauffman recently updated its approach to offer more timely and detailed insights across different regions. However, the organization notes that these stats don’t separate Main Street shops from high-growth startups or break things down by industry. Policymakers and analysts often look at these indicators together with BFS data to get a fuller sense of how new businesses are forming and growing.

Why these matters

When small business owners feel more optimistic, they’re often more likely to invest and hire. The latest numbers show that worries about growth have eased a bit. Still, owners are juggling concerns about finding good workers, pricing, and policy changes. Even though business applications have cooled slightly, they’re still strong, and the outlook for new employer businesses remains steady. This steady pipeline of new businesses is important for job growth and keeping local economies vibrant. Overall, these reports suggest Main Street is feeling more positive than earlier this year, even though challenges around talent, costs, and policies haven’t gone away.

Disclaimer: This article is for informational purposes only and does not constitute investment advice, an offer, or a recommendation to buy or sell any security. Readers should consult a qualified financial professional regarding their specific circumstances before making financial decisions.

Sources:
https://www.reuters.com/world/us/us-small-business-optimism-up-uncertainty-clouds-outlook-2025-08-12/
https://www.bloomberg.com/news/articles/2025-08-12/us-small-business-optimism-rises-to-five-month-high-on-economy
https://www.nfib.com/news/monthly_report/sbet/
https://ycharts.com/indicators/small_business_optimism_index
https://www.nfib.com/news/press-release/new-nfib-survey-small-business-optimism-rises/
https://www.nasdaq.com/articles/us-small-business-confidence-improves-july-nfib
https://www.nfib.com/wp-content/uploads/2025/08/NFIB-SBET-Report-July-2025.pdf
https://www.census.gov/econ/bfs/pdf/historic/bfs_2025m05.pdf
https://www.census.gov/econ/bfs/index.html
https://fred.stlouisfed.org/release?rid=468
https://www.census.gov/newsroom/press-releases/2025/business-formation-statistics-aug13.html
https://ssti.org/blog/kauffman-foundation-releases-second-report-new-indicators-entrepreneurship
https://indicators.kauffman.org
https://www.statista.com/statistics/224589/kauffman-index-of-entrepreneurial-activity-in-the-us/

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