The National Federation of Independent Business (NFIB) released its January Jobs Report on Feb. 6, including the launch of a new Small Business Employment Index that showed the small business labor market remains relatively stable despite a slight decline from December.
The newly launched index measures the current state of the small business labor market by integrating actual and planned changes in employment and employee compensation. The index fell nearly 1 point in January to 101.6, erasing about half of the large gain recorded in December, which had reached the highest level since March 2025. The index remains above the historical average of 100 and slightly above the 2025 average of 101.2. A higher index reflects a tighter labor market, while a lower index reflects a weaker labor market.
“Main Street continues to search for qualified workers for open positions,” said NFIB Chief Economist Bill Dunkelberg. “Owners reported increased wages over the last three months, alongside plans to increase them in the next three months as well.”
In January, 31% of small business owners reported job openings they could not fill, down 2 percentage points from December, according to seasonally adjusted data. Unfilled job openings remain above the historical average of 24%. Twenty-five percent have openings for skilled workers, down 3 points, and 10% have openings for unskilled labor, unchanged from the previous month.
Half of owners reported hiring or trying to hire in January, down 3 points from December and the lowest reading since May 2020. Forty-four percent of owners, representing 88% of those hiring or trying to hire, reported few or no qualified applicants for open positions, down 4 points from December. Twenty-five percent reported few qualified applicants, unchanged from the previous month, and 19% reported none, down 4 points.
Labor quality concerns continued to ease, with 16% of small business owners citing it as their single most important problem, down 3 points from December. This marks the third consecutive month that labor quality reported as the single most important problem has declined.
Labor quality as the single most important problem was highest in the construction, manufacturing and professional services industries, and lowest in wholesale and finance. Thirty percent of small businesses in the construction industry reported labor quality as their single most important problem—14 points higher than for all firms. Only 2% of businesses in the finance industry reported labor quality as their single most important problem. Labor costs reported as the single most important problem by small business owners remained at 9%.
On a seasonally adjusted basis, a net 32% of small business owners reported raising compensation in January, up 1 point from December. A seasonally adjusted net 22% plan to raise compensation in the next three months, down 2 points from December. Additionally, a seasonally adjusted net 16% of owners plan to create new jobs in the next three months, down 1 point from December.
“With our small businesses already burdened by high property taxes and inflation, seeing the Index dip slightly in January underscores the fragility of the current market,” said Logan Shine, NFIB Iowa state director. “If lawmakers want to maintain Iowa’s healthy economy, they must prioritize tax reforms necessary to keep our small businesses competitive and capable of finding the skilled workers they need.”
