Small Business Job Growth Trends Show Rising Wages Amidst Labor Quality Woes

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