WASHINGTON, D.C. (Jan. 17, 2025) – NFIB Research Center Executive Director Holly Wade joined Brad Smith of Yahoo! Finance to discuss this month’s Small Business Optimism Index, which reached the highest level in December since October of 2018.

Wade shares data from NFIB’s December SBET survey as she explains the sharp increase in optimism as it relates to owner’s expectations that business conditions will improve under the new administration. Wade also considers how new federal and state policies could impact inflation, compensation costs, and the labor market.

Watch Wade’s interview here: https://finance.yahoo.com/video/inflation-still-top-challenge-small-192000754.html

“After the election, small business owners were really optimistic about policy expectations going forward that were going to be easier on them in operating their business. You know, that regulatory environment that they have been having to struggle through over the last four years made a difference. So, it’s interesting to see this huge swing – about a 90-point swing – of net percent of those saying they expect business conditions to improve from January 2024 to December 2024. So, looking at the beginning of the year to the end of the year, we saw this massive surge in those saying they expect business conditions to improve. There’s a lot of expectations on having a better business environment going forward in 2025.

“[About one in five small business owners] are still saying that inflation is one of their top challenge in operating their business. We know that the cost of supplies and inventory is very frustrating for them, absorbing those costs and passing long those costs to customers, but the first impact of absorbing those higher costs is to their earnings. Tariffs are certainly a factor in that, so it just depends on where the policy directives take us.

“We have about 11% of small firms right now saying that labor costs are their single most important problem in operating their business. That’s only two points below the historic average of our 50-year survey. But actual compensation increases and planned compensation increases have eased quite a bit over the last two years. So, those pressures are easing up, even though they are historically very high. So, minimum wage increases will certainly impact some small business owners, either in moving up to that…new threshold, or making sure that they’re competitive with the salaries that are above the minimum wage and having to increase those as well.”