US Small Business Hiring Cools, With Wage Plans at 9-Month Low

The US job market at small firms is showing signs of cooling, with a key employment index posting a meaningful decline in March and plans for future wage hikes dropping to their lowest level in nine months. The National Federation of Independent Business (NFIB) reported its Employment Index fell 1.9 points to 101.6, a significant moderation in labor market conditions.

"The 1.9-point decline is a meaningful turn in labor market conditions," NFIB Chief Economist William Dunkelberg said in the report. "This decline is indicative of further moderation in the labor market."

The report's details paint a picture of a market that is loosening but still tight by historical standards. A seasonally adjusted net 18 percent of owners plan to raise compensation in the next three months, a 4-point drop from February and the lowest reading since July 2025. While 32 percent of owners reported unfilled job openings, this was down 1 point from the prior month.

This cooling in the small business sector, which accounts for a substantial portion of the US economy, could ease inflationary pressures and influence the Federal Reserve's thinking on interest rates. However, with labor quality still cited as the single most important problem by 15 percent of owners, the data suggests a complex environment rather than a sharp downturn.

Diverging Data Points

Other recent employment reports offer a mixed view. The Paychex Small Business Employment Watch for March showed continued stability, with its jobs index ticking up slightly to 98.81 and hourly earnings growth remaining below three percent. In contrast, ADP's national employment report indicated that the smallest businesses, those with one to 19 employees, added 112,000 jobs in March, driving most of the private sector growth. This divergence highlights the varied conditions across different segments of the economy.

This article is for informational purposes only and does not constitute investment advice.