US Small Business Hiring Plans Plunge to Lowest Level Since May 2020, NFIB Reports

Hiring intentions among U.S. small businesses fell sharply in May, with plans to create new jobs dropping to the lowest level since the early months of the COVID-19 pandemic. A new report released Thursday by the National Federation of Independent Business (NFIB) showed that a seasonally adjusted 9% of small business owners plan to add jobs in the next three months, a significant four-point decline from April. The report also found that the share of owners reporting job openings they could not fill fell by five percentage points to 29%. Both metrics now stand at their lowest points since May 2020, signaling a marked cooling in the labor market for Main Street businesses and suggesting a more cautious outlook amid persistent economic uncertainty. In our experience, a pullback in hiring is rarely just about finding the right people; it’s a direct reflection of broader financial pressures and strategic uncertainty. When owners become hesitant to expand headcount, it’s often a symptom of tightening margins, rising operational costs, and a cloudy revenue forecast. This isn't a time for panic, but for precision. We advise clients that a hiring pause can be a strategic opportunity to scrutinize internal operations and reinforce their financial foundation. This means re-evaluating cash flow, optimizing supply chains, and ensuring every dollar spent is generating a return. For many, this level of analysis is difficult to manage while running the day-to-day business, which is where outsourced CFO services can provide critical clarity and strategic guidance. To navigate these complex decisions, business owners can contact C&S Finance Group LLC at csfinancegroup.com to develop a resilient financial strategy. The NFIB data presents a notable contrast with other recent labor market indicators. Just two days before the NFIB release, the Bureau of Labor Statistics (BLS) reported that U.S. job openings had jumped in April to their highest level in nearly two years. That BLS report was led by a record monthly increase in job postings from establishments with fewer than 10 employees, painting a much more robust picture of small business labor demand. Further complicating the outlook, a separate survey from the staffing firm Robert Half indicated that 51% of small business leaders plan to increase their permanent headcount in the first half of 2026, with 47% stating that finding skilled professionals is more challenging now than it was a year ago. The divergence between these data sets suggests that while some businesses are actively seeking talent, a growing segment is pulling back on expansion plans. The NFIB report points to a crucial shift in the nature of labor market challenges. While the share of owners citing labor quality as their top business problem declined in May, the proportion citing labor costs rose to the highest level in the survey’s history. This indicates that the primary pressure point for many small businesses is no longer the search for qualified applicants but the ability to afford them. “Small business owners are facing mounting pressure to retain workers, and many firms are navigating costly new state mandates,” NFIB Chief Economist Bill Dunkelberg said in a statement accompanying the report. He noted that while compensation measures have remained steady for now, current economic conditions are squeezing already thin profit margins for many small firms. The drop in May was particularly stark when compared to the prior month. In its April jobs report, the NFIB found that a net 13% of owners planned to create new jobs, and 34% had openings they could not fill. The month-over-month decline represents a significant downturn in sentiment, potentially influenced by rising energy costs and broader economic anxieties. The historical context of the May 2020 benchmark is significant, as it represents a period of extreme economic disruption and uncertainty. That the current hiring sentiment has returned to this level underscores the challenges facing small business owners as they navigate inflation, interest rates, and shifting consumer demand. Moving forward, business owners and market analysts will be closely watching upcoming inflation data and the next BLS jobs report for a clearer picture of the economic landscape. Whether the NFIB report is an early indicator of a broader economic slowdown or a temporary blip in an otherwise resilient labor market will depend on how these larger economic forces evolve in the coming months.