Despite rising optimism, 36% of small business owners reported job openings they could not fill in July, the highest reading since June 2025. Over one-third of growth opportunities are missed, leaving businesses understaffed and unable to expand. Small business employment indexes are rising, and owners plan to create new jobs, but a widespread lack of qualified applicants makes filling open positions nearly impossible. This tension between high aspirations and ground-level reality suggests small businesses will likely face continued wage pressure and slower growth, potentially leading to increased automation or shifted hiring strategies to compensate for labor scarcity. Their current optimism could become a liability in 2026.
The Small Business Employment Index rose to 102.1 in July, according to ColoradoBiz, Alabama Political Reporter, and NFIB. The surge reflects strong confidence among small business leaders about future prospects. However, this optimism faces significant headwinds from labor availability, hindering job growth trends in 2026.
Optimism Meets Unfilled Demand
- 20% — A seasonally adjusted net 20% of owners plan to create new jobs in the next three months, up 9 points from June, according to ColoradoBiz and Alabama Political Reporter.
- 36% — 36% of owners reported job openings they could not fill, the highest reading since June 2025, according to ColoradoBiz and Alabama Political Reporter.
Small business owners are optimistic about expanding, with 20% planning new jobs. Yet, 36% report unfilled openings, a record high. The gap between intent and reality means strong hiring plans may not translate into actual growth if labor supply issues persist. Many owners appear to overestimate their capacity, risking operational bottlenecks.
The Persistent Problem of Labor Quality
| Metric | June 2026 | July 2026 | Change |
|---|---|---|---|
| Owners Hiring/Trying to Hire | N/A | 61% | N/A |
| Received Few/No Qualified Applicants (of those hiring) | N/A | 85% | N/A |
| Labor Quality/Availability as Top Concern | 19% | 27% | +8 points |
Figures reported by ColoradoBiz and Alabama Political Reporter.
In July, 61% of owners tried to hire, but 85% received few or no qualified applicants, according to ColoradoBiz. The profound disconnect in the labor market has made labor quality or availability the top concern for 27% of owners, an 8-point increase from June. The shortage is not just persistent; it is worsening rapidly, forcing small businesses to choose between stunted growth and unsustainable wage increases.
Rising Compensation Amidst Broader Moderation
A net 31% of owners raised compensation in July, up 3 points from June, according to Alabama Political Reporter. Sustained wage pressure in a competitive talent market is reflected. Yet, this strategy yields limited results: businesses are caught in a self-defeating cycle where higher wages fail to attract qualified talent. The problem extends beyond financial incentives, pointing to structural labor quality issues that pay alone cannot fix.
Micro-Businesses Face Unique Headwinds
- Small businesses with 1-9 employees saw a decrease of 8,700 jobs in May 2026, according to Quickbooks.
Despite broader optimism, the smallest enterprises are shedding jobs, with micro-businesses (1-9 employees) losing 8,700 jobs in May 2026. The disconnect between actual job loss and future hiring plans suggests that without a focused strategy for labor availability, many micro-businesses may face continued contractions through 2026.
