An increase in those expecting better business conditions primarily drove the rise in the Optimism Index. Photo courtesy of Freepik

SACRAMENTO REGION, CA (MPG) – A recent release of the latest National Federation of Independent Business (NFIB) Small Business Optimism Index shows a rise of 0.5 points in December to 99.5, remaining above its 52-year average of 98. An increase in those expecting better business conditions primarily drove the rise in the Optimism Index. The Uncertainty Index fell seven points from November to 84, the lowest reading since June 2024.

“Nice to see small business owners across the nation registering a slightly improved outlook even though it’s doubtful that sentiment is shared by many Main Street entrepreneurs here,” said John Kabateck, state director for the National Federation of Independent Business in California.

“For instance, the day before the release of the National Federation of Independent Business’s latest Optimism Index, the U.S. Department of Labor announced in the Federal Register that California has had outstanding advances on its unemployment insurance loans for five consecutive years and as a result, employers here will be paying more in Unemployment Insurance (UI) taxes this year. To cope with the pandemic-caused strain on their unemployment trust funds, 22 states needed to borrow from the federal government in order to keep their Unemployment Insurance trust funds solvent and unemployment benefits going to those in need of them. All but one state, guess which one, has paid Uncle Sam back. Only a territory, the U.S. Virgin Islands, has a worse record. Wow. What economic company.”

Said National Federation of Independent Business chief economist Bill Dunkelberg, “2025 ended with a further increase in small business optimism. While Main Street business owners remain concerned about taxes, they anticipate favorable economic conditions in 2026 due to waning cost pressures, easing labor challenges, and an increase in capital investments.”

According to the recent Optimism Index, the net percentage of owners expecting better business conditions rose nine points from November to a net 24 percent (seasonally adjusted), contributing the most to the rise in the Optimism Index. This was the first increase since July.

When asked to evaluate the overall health of their business, 9 percent rated it excellent (down 2 points), 54 percent rated it good (up 1 point), 34 percent rated it fair (up 4 points), and 3 percent rated it poor (down 2 points).

Twenty percent of small business owners reported taxes as their single most important problem, up 6 points from November and ranking as the top problem. This is the highest reading since May 2021.

In conjunction with the December report, the National Federation of Independent Business also released a new episode of the “Small Business by the Numbers” podcast. This is the National Federation of Independent Business Research Center’s new podcast where Holly Wade, the executive director of the National Federation of Independent Business Research Center, and Peter Hansen, director of research and policy analysis, discuss the data, stories, and economic conditions affecting small businesses nationwide.

National Federation of Independent Business’s monthly Small Business Optimism Index is the gold standard measurement of America’s small business economy. Used by the Federal Reserve, Congressional leaders, administration officials, and state legislatures across the nation, it’s regarded as the bellwether on the health and welfare of the Main Street enterprises that employ half of all workers, generate more net new jobs than large corporations, and gave most of us the first start in our working life. The Optimism Index (aka Small Business Economic Trends report) is a national snapshot of National Federation of Independent Business-member, small-business owners not broken down by state. National Federation of Independent Business members span the complete spectrum of small and independent businesses -- from sole proprietorships to firms with hundreds of employees -- across all industries and sectors.

Keep up with the latest California small-business news at www.nfib.com or follow them on X @NFIB_CA and on Facebook @NFIB.CA.

For over 80 years, National Federation of Independent Business has been advocating on behalf of America’s small and independent business owners, both in Washington, D.C., and in all 50 state capitals. National Federation of Independent Business is a nonprofit, nonpartisan, and member-driven association. Since our founding in 1943, National Federation of Independent Business has been exclusively dedicated to small and independent businesses and remains so today. For more information, visit nfib.com.