Amidst a complex economic landscape in 2025, both small and mid-market businesses are facing a notable decline in optimism, driven by persistent inflation, acute labor shortages, and new geopolitical trade challenges like tariffs, signaling a period of heightened uncertainty and strategic recalibration.
The year 2025 has presented businesses, from Main Street small enterprises to expansive mid-market firms, with a confluence of economic headwinds. Recent reports indicate a significant dip in overall business optimism, accompanied by a sharp rise in uncertainty. This shift reflects ongoing struggles with inflationary pressures, a challenging labor market, supply chain disruptions, and the tangible impact of new trade policies.
Small Business Sentiment: A September 2025 Reality Check
The NFIB Small Business Optimism Index experienced its first decline in three months in September 2025, falling two points to 98.8. While still above its 52-year average, this drop signals growing apprehension. Crucially, the Uncertainty Index surged by seven points from August to 100, marking its fourth-highest reading in over 51 years. NFIB Chief Economist Bill Dunkelberg noted that while many owners view their businesses as healthy, they are grappling with rising inflationary pressures, slower sales expectations, and persistent labor market challenges.
Key concerns highlighted in the September survey underscored the multi-faceted nature of these problems:
- Inflation and Supply Chains: A significant 64% of owners reported supply chain disruptions, a 10-point jump from August. Inflation was cited as the single most important problem by 14% of owners, up three points.
- Pricing Strategies: A net 24% of owners had raised average selling prices, and an even larger net 31% planned to increase prices in the coming three months.
- Labor Market Woes: Labor quality and taxes were tied as the top single most important problems (18% each). Labor costs also rose as a concern, cited by 11% of owners. Despite a net 16% planning to create new jobs—the highest since January—32% still reported unfilled job openings, with 88% finding few or no qualified applicants.
- Investment Hesitation: While 56% made capital outlays in the past six months, only 21% planned future investments, a historically weak indicator.
Regional insights echoed these national trends, with NFIB Nebraska State Director Ryan McIntosh stating that labor shortages are preventing small businesses from expanding and investing in communities, as reported by the NFIB. The broader sentiment among voters, as evidenced by The Center Square Voters’ Voice Poll, also showed widespread concern over rising costs and inflation, aligning with small business struggles.
Earlier Indicators: February 2025 Trends
The challenges seen in September were not isolated events but an escalation of trends already evident earlier in the year. In February 2025, the NFIB Small Business Optimism Index had already receded by 2.1 points to 100.7, while the Uncertainty Index spiked to 104, its second-highest recorded reading. At that time, labor quality had surpassed inflation as the single most important problem for business owners, cited by 19%.
- Economic Outlook: The net percent of owners expecting the economy to improve fell significantly in February, and the percentage viewing it as a good time to expand saw its largest monthly decrease since April 2020.
- Persistent Price Hikes: Price increases were already widespread, with a net 32% of owners raising average selling prices, marking the largest monthly increase since April 2021.
- Profitability Struggles: Positive profit trends were already in negative territory, with weaker sales and rising labor and material costs frequently blamed for declining profits.
Mid-Market Concerns: The Reality of Tariff Threats
Beyond small businesses, mid-market leaders also reported a decline in optimism for the first time in two years, according to Grant Thornton’s International Business Report (IBR) covering Q4 2024 to Q1 2025. This downturn was largely attributed to the “threat of tariffs becom[ing] reality in global trade.” Economic uncertainty remained the leading concern for 55% of mid-market respondents.
The impact of trade policies led to a significant regional divergence in sentiment:
- Optimism fell noticeably in North America (U.S. down 7 points, Canada plummeting 14 points) and South America (down 12 points).
- In contrast, European and Asia-Pacific confidence remained stable, while Africa saw an increase in optimism.
Mid-market businesses, while expecting record revenue growth, were less optimistic about increasing profitability. They also planned fewer increases in exports and expansions into new countries, instead focusing on generating more revenue from existing international markets. Investment priorities shifted, with a significant 10-point rise in plans to invest in AI, while investment in sustainable initiatives notably declined, suggesting a prioritization of immediate operational needs over longer-term environmental goals.
Navigating Persistent Challenges and Seeking Resilience
The collective data from NFIB and Grant Thornton paints a consistent picture: businesses across the spectrum are facing a prolonged period of economic uncertainty. The interplay of high inflation, a tight labor market characterized by skill shortages and rising costs, and evolving global trade dynamics is creating a challenging environment for planning and growth. While owners demonstrate resilience, as noted by NFIB’s Bill Dunkelberg, the dip in capital outlay plans suggests a cautious approach to future expansion.
As policymakers reevaluate monetary strategies and businesses adapt to new realities, the emphasis remains on operational efficiency and workforce development. The rise in AI investment signals a forward-looking strategy to mitigate labor costs and enhance productivity. Understanding these intricate trends is crucial for businesses, employees, and consumers alike as the economy navigates this complex landscape in 2025.
