Optimistic but On Edge: What NFIB’s Indexes Say About Small Business in 2026

Holly Wade (00:00)

One of the areas that we hear about a lot is that uncertainty. So, while the uncertainty index declined, it's still really high, historically speaking. And so they're in this state of flux. I don't know what, you know, do I invest in my business? Do I wait for the Fed to move on lowering interest rates to make it less expensive for me to finance projects? Do I wait to see how some of these big policy shifts on the federal level, you know, how they roll out so that I'm better equipped to handle some of those changes?

Peter Hansen (00:37)

Welcome to THRIVE, a Paychex Business Podcast. Your blueprint for navigating everything from people to policies to profits. And now your host, Gene Marks.

Gene Marks (00:49)

Hey, everybody, it's Gene Marks. And welcome to another episode of the Paychex THRIVE podcast. Really glad to have you here. I'm really excited to have our two guests today. Both have worked at the National Federation of Independent Businesses for a number of years. It's Holly Wade, executive director of the NFIB Research Center, and Peter Hansen, the director of Research and Policy Analysis at NFIB. Both of you guys, really, really happy to have you on. Thanks for taking some time.

Holly Wade (01:19)

Thank you. This is great to be on the show.

Gene Marks (01:21)

Yeah, it's exciting to have you guys. I mean, so you guys know, I mean, like, besides being an accountant here, you know, I write every week, you know, for the Guardian and for The Hill and Washington Times and a bunch of other places, Philly Inquirer. I reference the NFIB all the time. And I, you know, I have specific questions about some of the data that you guys publish, how you guys come about publishing that data, and then also some of your thoughts on it. But before we get into that, let me first, just so we can set the stage, get a little bit of a background. So, Peter, I'm going to start with you. Just a very short, you know, background of yourself and what you do at the NFIB.

Peter Hansen (02:02)

So, I'm an economist by training with a bit of extra background in market research. Worked at the Federal Reserve Board and another trade association. And I just really love taking on the big question of the day. You know, the cover of the Wall Street Journal, you know, something, you know, what's on the mind of, you know, podcast listeners here, people who read our content and kind of translating the big trends into plain English and talking about what it means for our members, our small businesses.

Gene Marks (02:32)

That's great. You know, huge, huge need. And our audience, as you know, are small business owners and managers at small businesses as well. And everybody is trying to get a handle on where the economy is going. So you're absolutely right. And the podcast that you guys always tell me a little bit about that.

Peter Hansen (02:50)

So Holly and I have a podcast where we really try to take the detailed numbers, everything we know about small businesses, and then just have a nice accessible conversation about it, where we try to peel back the layers and get at the most important trends and the most important things to anticipate in the coming months. Every month we come out with one about our monthly survey. And then we also kind of intersperse some ad hoc episodes as we do, say, a special topic survey, or when we have an opportunity to bring on Bill Dunkelberg, affectionately known as Dunk, NFIB's longtime chief economist, who's the absolute guru of small business economics. And, you know, the purpose there is to inform policymakers, inform researchers, inform, you know, maybe the numbers-oriented small business owners about the latest and greatest, the big trends, and what's coming up next.

Gene Marks (03:51)

All right, that is great. So just to make sure you're not having like Beyonce or Zendaya on your podcast. Correct?

Peter Hansen (03:58)

We just, you know, they keep asking, but it's really not dramatically appropriate.

Gene Marks (04:03)

Schedules are tight, you know, schedules are tight. Holly, you are the executive director of the NFIB Research Center. You also co-host this podcast as well, which is great. A little bit of background for yourself.

Holly Wade (04:14)

I've been with NFIB for nearly 25 years in different capacities and in the research center since 2004. So it's been quite a journey being in the research center. It's fantastic. Better understanding small businesses, how they operate during different economic conditions, economic cycles, business cycles, and what their challenges are, because it's kind of a shifting target, you know, depending on what conditions they're facing out there. So since 2004, we've been serving small business owners and talking with them about what's really important driving their business, what challenges they face. And so I've been here a long time. Our chief economist has been here even longer than me. My predecessor was the founder of the research center, and he had been here for 30 years. So, between all the long-timers within the research center, we have, you know, hundreds and hundreds of years.

Gene Marks (05:25)

Yeah, it's pretty wild. And you know, the uncertainty... By the way, when we talk about the indexes that you guys have been working with, so I never know whether they're called the optimism index or the uncertainty index, how do you refer to that index every month?

Holly Wade (05:39)

So, they're two different indexes. Which, yeah, and then we had to include the employment index. So, we had three. That seemed like a good number of indexes for us. But the optimism index is our headline measure of the health of the small business economy. Our uncertainty index, because uncertainty had turned into this concern among small business owners. We developed that out of questions and the answers to those questions that were, I'm uncertain, don't know, those sorts of responses, and created an uncertainty index. And then Peter can go into our employment index. So we have three ways of looking at kind of overviews of different areas of small business. The small business optimism index being the most known and notable, and captures the kind of headline measure, as I said, of the small business sector.

Gene Marks (06:34)

Peter, I'll get to you in a minute because I do want to talk about jobs. But Holly, when we're talking about the optimism and the uncertainty indexes there... I have two questions for you. First of all, there are a lot of optimism indexes that get circulated around from a bunch of other, you know, different places. And I put less credence when I see surveys like that because, you know, a lot of times people have their own agenda, you know, I don't know, you know what I mean? Like, more small business owners tend to buy hot dogs next year, you know, a survey done by the American Hot Dog Association, you know, that, you know what I mean? So, I get, I always question that. I've never been like a fan of surveys that was like, I like real data, you know, like, I mean, I use like, you know, Paychex, we'll talk about employment, but they actually, their Small Business Employment Watch uses like data from their payroll system, you know, so that's like the real stuff. But the NFIB is the one survey that I do tend to look at more closely for two reasons. I just want you to validate this for me. Okay. Number one is, is that you guys have been doing this for 52 years. So, when I see like the most recent survey is like small business, you know, optimism decreased a little, but it's still above its 52-year average. That's like a, you know, a good sign for me, you know, like, okay, still up there, and we all know how important small businesses are to the economy, so it's been gone for a while. Number two is you guys have been using the same methodology and I'm assuming that you're getting data from either your members or the people that you're asking. So is that true? Like, is this, is this just a question-and-answer thing or are people submitting data to you from their businesses about how their businesses are actually doing? Is that, does that...

Holly Wade (08:18)

Sure. Yeah. So, as you said, we have been conducting this survey for 52 years. And the methodology and how we collect the data has been the same the whole time. So we have a very large membership. We're the largest small business advocacy association in the country, and we have roughly 300,000 members. So, we have a huge pool of small business owners to sample every month. Every month, we send out a questionnaire to a sample of our membership. We do it old school, we mail it out on paper, they send it back, and we data-enter all those responses and then aggregate those numbers. The questionnaire has also remained relatively the same. So thankfully, there hasn't been a lot of kind of tinkering with the questionnaire because we're able to now have this huge timeline of data collected over those 52 years that we can compare results from. And so most of the questions, and this is one area that is often different than some other surveys, is we're asking about operations. Do you anticipate sales increasing or decreasing, or remaining the same in the next three months? Did sales increase or decrease, remain the same in the past three months? Employment, capital spending, their single biggest problem, inventory, prices. So, it's all operational-based and how they're doing. We generally don't ask questions about how they feel about things because that becomes a bit more subjective. But when we ask about, you know, how they're operating their business, business owners tend to want to, you know, talk about their business. It's their livelihood, it's so important to them. And so we're able to get this really rich amount of information from this subset of our members every month that gives us a better picture of how the general population of small business owners are doing month to month.

Gene Marks (10:24)

Got it. So you're getting it from your members. These are manual surveys that you're sending out. You're doing this through the mail. The members are responding to the, you know, to the questions on that survey. Correct? How do you account for just, you know, and again, Peter, I'm gonna get you in a minute because I want to talk about jobs, but how do you account for your bias, you know, in this, Holly? I mean, you know, first of all, small business owners are generally more glasses-half-full than half-empty. That's number one. But also, you know, there's political bias as well. I mean, just be straight out. I mean, different people depending on the administration that's in power, If that business leans that way they're always going to be like, yeah, we're optimistic about what, because I voted for that guy. So, I would expect, you know, I'm expecting good things. And then also to take into account that, you know, the majority, according to Pew Research, you know, the majority of small business owners tends to lean a little bit to the right, so, you got that factor going on. Anyway, how do you, how do you account for that? Those variables?

Holly Wade (11:20)

Sure. So accounting for the bias, if there is, you know, for all the biases that small business owners might have, that we might think or perceive them to have, they're built in. So, you know, month to month, we're looking at the change over time, and so those biases are just part of the data that we're collecting. It's been the same probably over the whole time, because you're right, small business owners tend to be a bit more conservative, but it's because of the platforms that candidates run on. Some tend to be more supportive of the things that are important to small business owners. So, they're offering solutions or policy positions that are more business-friendly, small business owners, because it's their income, their livelihood, generally, as talking to small business owners, their life, that's hugely important to them. So, the political part of it plays a, plays a role, but it's because, you know, not because they're just Republican for Republican sake or more conservative for conservative sake, it's because of the platforms or the policies that they're supporting that are benefiting the small business. So all of that in tracking over time, in looking at that population, we're able to say that, you know, within this population, the dynamics that are unique to them, these changes over time are the changes that they're expecting, experiencing. We're not going from kind of one population to a different population with a different set of biases. It's all incorporated in kind of the same group that we're asking these questions of.

Gene Marks (13:03)

Got it.

Peter Hansen (13:04)

And Gene, one thing I really, I think it's really important to understand is that, you know, I think some of the premise of your question is like you have this like actual signal about business, and then you've got this noise about politics. And those are two separate things that like the politics really is noise. But here's the important factor. When you peel back the onion, and you look at actual behavior and political affiliation, that feeling, that political background does actually impact behavior. So, a business that, let's say it's a conservative business owner, a conservative president comes into office, and all of a sudden they're feeling more optimistic, and the metrics change a bit. Well, they are actually going to run their business differently. So, it's not just some totally artificial political thing that, let's say you're a bank on Wall Street who's trying to understand the trajectory of small businesses. If you throw out the whole political perspective shift, you're actually going to be wrong because they're actually going to change their behaviors. That's not to say you want all the politics and a ton of movement from political views. I think actually the optimism index, you know, when you start to peel back the layers, it does a really nice job of getting at sort of actual business where there's like, you can see some, maybe some political shift in there, but I think it's in a place where you can understand the balance between certain signals that are very political, certain signals that are a little bit more independent, and the reality, which is that the politics are an important part of how businesses are actually running their business.

Gene Marks (14:50)

Yeah, I agree with you. I guess you can also go both ways, I mean, if people are feeling less optimistic, they might be more inclined to run their business in a less optimistic way, making less investments or hirings or whatever.

Peter Hansen (15:01)

Yeah, absolutely. It's an important factor.

Gene Marks (15:04)

Yeah, it's an interesting thing. And then also, and Peter, I'll stick with you on this question. Like the demographics that you guys are serving, I don't know how many, if you're willing to disclose how many survey responses that you usually get in a month, but are like, sometimes I envision, and I hope you guys don't answer me, I envision the guy that's been running this business for 60 years, he's 82 years old, and he diligently fills out that survey every single month and licks the envelope and mails it in like he was doing back in 1980. And I sometimes I feel like, you know, that's, it's this same people, like, responding, you know what I mean? So, their views are always going to be whatever their views are, as opposed to, you know, maybe younger generations or younger people that wouldn't necessarily aren't either, aren't members of the NFIB, but even if they are, members wouldn't necessarily have the time or the inclination to, say, respond to a manual survey, you know. So, Peter, like, how, tell me about the demographics of your survey respondents. And does that, has that changed over the years?

Peter Hansen (16:09)

Yeah, absolutely. So, a couple of important factors are we're surveying NFIB membership. And we're serving just actually really kind of a relatively small sample of them each month. So, it's not the same people. You know, the same people might not get surveyed. You know, they might get surveyed this year and then maybe not until next year, a year after. That's like just do they get a letter or not? You know, and then really irrespective of your age, a lot of, you know, like, it's how busy you are, you know, how well you know NFIB. And I think another important factor is it's not just like in and out of the sample because you're going to be out almost all the time. But NFIB's membership, you know, it turns over a lot. We have a lot of really longtime members, but these members, they're very busy. They don't have time to, oh, let's make sure I renew my NFIB membership. You know, we're getting lots of new members in. Let me lose some, let me get 'em back. And so that means that like when you're saying like, is it just the same, you know, core of people? I mean, the short answer, the simple answer is no. I think the one factor that, you know, I would say, you know, important point, it's part of our membership is they do skew a little bit older, a little bit more mature businesses, and here's why. It takes a little while, you know, after you start your small businesses to one, you know, before an NFIB sales rep, you know, comes and talks to you, and then, you know, NFIB, it's really important, we feel, but for a small business owner, you know, it's a cost. And so if you're in the first couple of years, you know, someone says, hey, we'd love for you to like help support the voice for small businesses, you know, in your state capitol and in Washington, it's like, I don't have the room to be a part of that, that movement right now if you're in those first few years. And maybe as well in those first few years, you don't necessarily have the motivation. But give it five, 10 years, you're established, you're successful, you've had a lot of headaches from, you know, an obnoxious regulation or taxes are really biting your bottom line or there's something inflation related that's, you know, it's a bee in a bonnet for you, then when that salesperson comes now, you become a member. So that means that we have, this is important to keep in mind, a little bit more mature small businesses than if you just absolutely pick the most random small businesses. And because our small businesses are more mature, our membership is a little bit older, but it's dynamic is changing. I think a really important point as well is if, and we publish the number, you know, like business, small business types, we have all kinds of small businesses. You know, there are, you know, your classic Main Street retailers, there are certain, you know, professional services, accounting, law, there are construction, manufacturing, farmers. It's really quite an impressive cross-section. And you know, the numbers are on our website. We publish them. You know, you can look and see just what a diversity of small businesses are included in our membership.

Gene Marks (19:13)

Can I ask, Holly, can, you know, there are some organizations that do reports on their, on their members. The AIA does their billings index. They ask their members to submit billings information to them. You know, the Institute of Supply Management asks their members to submit certain data from their companies every month so they can come up with their manufacturers and service index as well. Intuit pulls numbers from their database and they do sort of a small business pulse thing that, you know, from their actual database. Again, using Paychex as an example, they're using actual data, you know, from their members. I mean, have you guys, you, is it ever a consideration to come up with the NFIB, you have so many members, who's got so much valuable information, is there, has there been ever discussion or any thoughts, Holly, on like, you know, to be a member of the NFIB we ask that you submit, you know, your revenues for the past month every month to us, you know, or your profitability or your number of employee, your head count and then we can turn that into how are our members actually doing? You know, is that something that's been thought about? And I'm just kind of curious your thoughts on those kinds of indexes.

Holly Wade (20:28)

Since I've been here, no, there hasn't been larger conversation about that. However, we know that small business owners, first, they don't have a lot of time to dig up paperwork and submit or anything like that. Second, they would likely be real reluctant to send that type of information to, you know, to anybody outside of their business. So, a lot of times they're very protective about their information and running their business. Those larger businesses, they're just more used to submitting information like that either to, you know, government agencies, Census, Bureau of Labor Statistics, those sorts of places. And you know, that would sometimes include their association, but we've never asked. I don't think that it would be very successful for our folks, and as Peter said, there's a lot of churn within our membership because small business is dynamic. It's a very dynamic state of our economy. And so having new members and asking them might not go over so well. So, I am sure that it's been discussed, but nothing, you know, not a discussion that's been elevated.

Gene Marks (21:41)

Peter, the, your jobs numbers, this is the new jobs index. Why did you guys decide to do this? And also, what's the methodology behind those numbers?

Peter Hansen (21:52)

So, we've always asked around a half dozen job-related questions in the survey. And historically analyzing jobs for small business meant kind of like reading the tea leaves of those various numbers. This one's saying that, that one's saying this, and that's difficult for us as analysts who are looking at the numbers all the time. And then you get a layer removed, and you're a reader who's trying to get like, give me the hard-hitting facts, give me what I need to know. And it's just too complicated. Right? And that's the value of engaging in a process where you figure out, let's get the most valuable questions here, and let's translate them into a single number that performs well compared to unemployment, labor force potential, various metrics that you might be looking at from outside of NFIB, but has that independent small business signal. And that was sort of the impetus for us to create this employment index. And really, already it's been so valuable because we're not reading tea leaves anymore. We're trying to say like net is employment up, is employment down? Not in the sense of like let's say I should really be saying more like is labor market tightness kind of moving upwards or moving downwards? Because it's more of an overall. And you know, we knew that 2025 was a tough year. We knew that things, you know, had especially started 2025, there was deceleration in the labor market. And then it seemed like the numbers maybe stabilize. You know, trying to understand, you know, especially as like the way the employment markets have been moving was to a point where you were like, if they go much lower, we're going to be really concerned. And so the new employment index says things kind of stabilized, maybe ticked up a little bit. Some of the ticking up I'll just emphasize is based on the compensation components of the index. So, the index is composed of four different questions entering the index in a couple ways. And those questions are fundamentally about kind of like job count and compensation. And what we're seeing in the index is as I mentioned, some kind of stabilization from the worst conditions in 2025, possibly a bit of reacceleration. And when you peek under the hood, it's showing that that's reflecting kind of continued cost pressure, compensation pressure, You know, we'd even throw the word inflation in this conversation more than specifically job count numbers. So, it's a bit of a complex picture where it's like, oh, it doesn't, it's not telling you, even though the numbers are, like, ticking up a little bit, it's not telling you that the next month job numbers expect to see a big pop because, but I think what it's telling you is, like, compensation still a challenge, businesses are doing okay with their labor. It's still a challenge to maybe hire a qualified worker. That's the picture we're getting from our index right now.

Gene Marks (25:21)

So, your index dovetails in with Paychex's Small Business Employment Watch, which really has been saying the same thing, that small business hiring has been stable, if not resilient. And, you know, wages, at least hourly wages, have been holding at a little bit below 3%, you know, annually. And again, that's based on their data. You're doing yours based on the survey data that you're bringing in. Meanwhile, the Bureau of Labor Statistics, Department of Labor just released what, like, you know, earlier this month, you know, you know, the economy lost 92,000 jobs and the unemployment rate ticked up. How do you reconcile your, you know, your responses to what the Department of Labor is reporting?

Peter Hansen (26:03)

Well, I think there's two important layers. One is there's a lot of editing going on with the Department of Labor. And I'll mention as well, like, January is that, January is a good month, and then February is a bad month. January had some edits that made it a little less positive. So when you're looking at, you know, a specific month compare of Department of Labor compared to a specific month of NFIB, it's really more about the trends. And I would say that the other layer is small businesses are 45%, roughly of the economy overall. So maybe they're a bright spot. Not to say the large businesses are suffering and small businesses are doing well, but let's say the job market is more like say, meh for large businesses. And maybe it's a tick above meh for small businesses.

Gene Marks (27:05)

Right, large businesses and government, too, by the way. You know what I mean?

Holly Wade (27:08)

I was going to add that government is also the component that we don't have in our survey that, you know, with the BLS data, and that's been, you know, pretty volatile over the last year. And so that's causing a lot of havoc within BLS in those numbers. So that's also a big factor.

Gene Marks (27:26)

It's great. Both of you guys, great assessments as well. And then I also, you know, want to say that, you know, the BLS often goes back and they revise their numbers. Right? Three, four times after they release. And in two years in a row, the BLS has come and, you know, and you represented hundreds, 800, 900,000 of, you know, overstated jobs when they look back over the prior whole year. So that's also concerning to people that are trying to run their businesses based on this data. You know, it changes so much.

Holly Wade (27:53)

It is. It's hard because the revisions, as you all mentioned, you know, they're pretty significant as of late. And just surveys in general, collecting data, generally speaking, in our field, is becoming increasingly more difficult. Whether it's people not feeling comfortable in giving you the information, or that there's just less time getting a hold of people to get that information. Technology has changed. You're able to filter out and screen out people more quickly than you were able to before. So just surveys in general are just more and more challenging to get people to respond and kind of voluntarily give you information that's so helpful for us to better understand economic conditions.

Gene Marks (28:40)

Yeah. Why have you guys stuck to the mail out of curiosity? I mean, if you just said that it's hard to get a response.

Holly Wade (28:47)

So that's. part of it. So mail for us, we get about twice as many responses by mail, paper mail, than we do online. And that's one of the big reasons. We want to make sure that everybody that is sampled has an opportunity to fill out our mail survey. And when you were talking about those biases, you know, when you start being specific about the type of mode that you're trying to collect the information, you know you're going to have some biases built into that, too. And so whether you're just looking, and we do often, you know, we also do online surveys, email surveys, but, you know, there might be some biases in responses from those who would more likely fill out those type of surveys versus mail survey that hits everybody equally. We could, you know, every small business has an address that we can find, so that's helpful in making sure that it's as comprehensive as possible.

Gene Marks (29:47)

That's great. That is great. All right, listen, we only have a few minutes left, and Holly, I'm going to give you the final word here. I just, I do want to get your interpretation on the optimism data and the uncertainty index as well. If I recall, optimism has been sort of holding steady. It's above the 52-year average. Uncertainty, though, is decreased a little bit this past month as well. Can you talk about your recent numbers, and also, you know, how do you think small businesses are feeling going forward into 2026? I'm sure you've gotten this question a lot.

Holly Wade (30:18)

Yes, we have. And it's interesting because, you know, it has, our optimism index, as you mentioned, has ticked down just gradually over the last few months, and we're hitting about the 52-year average, which is typically, you know, a good solid year for small business or a good solid measure level for a small business. And so when thinking about it, they're doing okay. Their, you know, their sales, yeah, sales are fairly strong for most small business owners. When we ask about the state of their general health of their business, most of them are saying good, excellent. So that's a great sign. And that hasn't moved over the last 12 months either. So, you know, the optimism index, the question about health of your business, over the last 12 months, they have remained in a relatively narrow band, those numbers, but it's not terribly enthusiastic, you know, they're not terribly excited. One of the areas that we hear about a lot is that uncertainty. So while the uncertainty index declined, it's still really high, historically speaking. And so they're in this state of flux. I don't know what, you know, do I invest in my business? Do I wait for the Fed to move on lowering interest rates to make it less expensive for me to finance projects? Do I wait to see how some of these big policy shifts on the federal level, you know, how they roll out so that I'm better equipped to handle some of those changes? Thankfully, the, you know, One Big, Beautiful Bill that was very helpful and at least taking off the table federal taxes as one of those components to uncertainty, but there's still a lot of other areas that make small business owners kind of uncomfortable, or I guess less comfortable in operating their business. And so there's a bit of hesitation there whether it's on investing in growing their staff or in capital spending. So, kind of in both areas, a bit more hesitation, but sales still seem to be fairly supportive of most small business owners in operation. That's a good sign. That doesn't seem to be something of concern in the near term. But you know, of course, having done this for many years and having the time series that we do over 52 years, you never know when things take a, you know, a big turn to the right or left, and the picture looks different. But as it looks right now, things seem to be fairly stable, but still with this high level of uncertainty.

Gene Marks (33:03)

My dad always said things are never as good as they seem. They're never as bad as they seem, you know. They just are.

Holly Wade (33:09)

Perfect way of looking at it. Yes, very true, very true.

Gene Marks (33:13)

Holly Wade is the executive director of the NFIB national, the research center at the NFIB, the National Federation of Independent Businesses. Peter Hanson is the director of Research and Policy Analysis at the NFIB. Both of them host a great podcast, which I've already listened to a couple episodes that talks about the economic data and its impact on small businesses, and they're the ones or part of the team at least for making sure that we get the optimism index, the uncertainty index, and now the jobs index out every month. That really gives us a pulse on how small businesses are doing. Holly, Peter, thank you guys so much for taking out the time. This is great. Would love to check back in with the two of you guys, maybe later on this year, and seeing how the index is going. I watch it very closely every month. So you guys, you do great work at the NFIB, so thank you.

Holly Wade (33:59)

Thank you so much. It's been great being part of the podcast.

Peter Hansen (34:02)

My pleasure being here. Thanks for having me.

Gene Marks (34:04)

Do you have a topic or a guest that you would like to hear on THRIVE? Please let us know. Visit payx.me/ThriveTopics and send us your ideas or matters of interest. Also, if your business is looking to simplify your HR, payroll, benefits, or insurance services, see how Paychex can help. Visit the resource hub at paychex.com/WORX. That's W-O-R-X. Paychex can help manage those complexities while you focus on all the ways you want your business to thrive. I'm your host, Gene Marks, and thanks for joining us. Till next time, take care.

Announcer (34:38)

This podcast is property of Paychex, Incorporated 2026. All rights reserved.