Small-business owners across the United States are losing faith in the economic outlook, with a major industry index falling to its lowest level in weeks as owners contend with rising costs, labor shortages, and weakening consumer demand.
The National Federation of Independent Business reported that its Small Business Optimism Index dropped 0.6 points to 95.3 in May. The decline reflects mounting pressure from multiple directions: fuel prices, supply-chain expenses, wage pressures, and the ripple effects of inflation on customer spending.
Labor challenges are particularly acute. Just 29% of small-business owners reported having unfilled job openings, the lowest share since the COVID-19 pandemic ended. Among those struggling with staffing, 13% identified labor quality as their top concern, while 14% cited labor costs as their biggest obstacle.
For business owners across the country, cost pressures are compressing margins in ways that feel relentless and inescapable.
Barrett Willits runs Barry's Blind Factory in Huntsville, Alabama, a 33-year-old operation selling directly to consumers. His sales have declined while supply-chain costs have soared. He described a particularly bitter twist: his suppliers were acquired by a hedge fund that also owns Heinz, which then shuttered American manufacturing operations and moved production to Mexico. What once traveled 100 miles now travels thousands. "Every time you turn around, there is a new price increase, a new shipping rate, a new surcharge," Willits said. He worries that as his costs climb, customers simply stop buying.
Transportation-dependent businesses are especially vulnerable. Tina Spears, a 73-year-old pet sitter in Anchorage, Alaska, has watched her margins erode as gas prices surged. She raised her rates, but acknowledged the limits: "How high can I go when everything else is so expensive?"
Some owners are finding creative ways to absorb costs without pricing customers out of the market. Roger, a 58-year-old bed-and-breakfast owner in Sevierville, Tennessee, held his rates steady while tightening operations and implementing strategic pricing adjustments. Higher occupancy has offset rising costs so far, but he said further increases in expenses, particularly transportation costs tied to geopolitical instability, may force his hand and deter travelers from booking vacations.
In northern California, a 58-year-old plumber named Geoffrey said his business has shifted dramatically from profitable remodeling work to emergency services, which now account for 80% of his business. His employees are complaining about insufficient hours, and he's uncertain about his own retirement prospects.
Even businesses with consistent foot traffic are struggling. Katrina Oprisko owns Earthwell Refills, a natural products store in San Diego. Customer volume remains steady, but purchases per visit have fallen. Combined with rising wholesale costs, she has become more selective about inventory, deliberately delaying orders and strategizing about what products to stock.
Some owners face headwinds from policy changes. Braxtin Angelo, a 43-year-old mother with disabilities in Washington state who sells topical products for chronic pain and disabilities, said changes in the political environment have dampened customer spending and made her supply chain more expensive. Tariffs have increased her acquisition costs, while postage increases have made shipping so expensive that orders often generate losses on her website.
For owners approaching retirement, the economic climate has created unexpected obstacles. Keith Lam operates a hearing-aid clinic in Albuquerque, New Mexico, with his wife. They planned to sell and retire this year or next, but the sluggish business environment has made finding a buyer nearly impossible. They've cut operating hours to two days per week by appointment only and now rely largely on his Social Security benefits to stay afloat.
Author James Rodriguez: "When half a dozen business owners in different states are all describing the same wall of mounting costs and shrinking demand, the national numbers aren't abstract anymore, they're a portrait of genuine distress."
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