Small Business Hiring Rebounds as NFIB Index Rises
Small business hiring picked back up in July, according to the NFIB July Jobs Report, which showed the Small Business Employment Index climbing to 102.1 after four straight months of decline. The June reading was 100.2, so the move marks a clear turn. It also sits above both the 2025 average of 101.2 and the long-run average of 100.0.
For founders, this is a useful signal about the labor market you are hiring into right now. Owners are planning to add people, yet they still cannot find enough of the right ones. That gap shapes how fast you can staff up and how much you will pay to do it.
It also helps to read the report as a mood, not just a metric. Owners are cautiously confident, and that mood tends to shape wages, benefits, and how aggressively your competitors chase the same talent.
What the July Numbers Actually Show
The index rebound was driven by stronger forward-looking plans rather than a jump in actual hires. In fact, real hiring activity slipped by a single point, with 61% of owners reporting that they hired or tried to hire in July. So the optimism is about the months ahead, not the past few weeks.
Demand for workers stayed high. The NFIB report said, “In July, 36% (seasonally adjusted) of small business owners reported job openings they could not fill, up 4 points from June and the highest reading since June 2025.” Skilled roles led the shortage at 31%, while unskilled openings sat at 14%.
The quality of applicants remained a sore spot as well. Among owners hiring or trying to hire, 85% reported few or no qualified candidates for their open roles. So the problem is not just posting jobs, it is finding people who fit them.
Here is a quick snapshot of the headline figures for context.
| Measure | July reading | Change vs. June |
|---|---|---|
| Employment Index | 102.1 | Up from 100.2 |
| Owners with unfilled openings | 36% | Up 4 points |
| Plan to add jobs (next 3 months) | Net 20% | Up 9 points |
| Raised compensation | Net 31% | Up 3 points |
Why Founders Should Care About the Hiring Turn
The report cited, “A net 20% of owners now plan to create new jobs in the next three months, up nine points from June. That is the strongest hiring appetite since October 2022, and it runs nine points above the historical average.” When peers plan to hire, competition for the same candidates tends to rise.
NFIB Chief Economist Bill Dunkelberg framed the month as a tale of two forces, noting that spending is concentrating in big projects like AI data centers while Main Street struggles to match hiring to growth. For a small team, that means talent could get tighter before it gets easier. The recent July jobs report pointed to the same slow-labor backdrop.
Pay pressure is building too. A net 31% of owners raised compensation in July, and a net 19% plan to do so soon, with both measures above their historical norms. Rising wages protect offers, yet they also stretch thin payroll budgets.
What to Do With Your Next Hire
Start by tightening your role definitions before you post. Because 51% of hiring owners reported few or no qualified applicants, a vague listing will only widen that gap. Clear scope, clear pay bands, and a fast interview loop help you win the candidates who do apply.
Next, weigh flexible talent against full-time headcount. Contract and fractional help can cover skilled gaps while you test demand, and the rise in skilled freelancing gives founders more options than a few years ago. You can convert strong contractors later once revenue is steadier.
Finally, protect the team you already have. With 27% of owners naming labor quality or availability as their top problem, retention is cheaper than a new search. Small raises, clearer growth paths, and steady feedback keep good people from leaving during a tight market.
What to Watch Over the Next Quarter
Keep an eye on whether planned hiring turns into actual hiring. The gap between intent and activity is the story of this report, and it will likely define the fall. If openings stay unfilled, expect wages to keep inching up.
Also track how AI spending reshapes demand for roles. As founders lean on automation, some hiring shifts from headcount to tools, a pattern visible in recent AI layoffs across tech. Watching broader federal labor data alongside NFIB can help you separate signal from noise.
Frequently Asked Questions
What is the NFIB Small Business Employment Index? It is a monthly gauge of hiring activity and plans among small business owners, where readings above 100 point to expansion.
Does the July rebound mean hiring is easy now? No. Plans improved, but most owners still report few qualified applicants, so competition for skilled workers remains tough.
How should a small team respond? Sharpen job descriptions, consider fractional talent for skilled gaps, and invest in retention before launching a costly new search.
