Your Paycheck In 2027: Will You Get A Raise Or Get Laid Off? | Holly Wade

Holly Wade · NFIB (National Federation of Independent Business)

Elevated small-business uncertainty is making owners hold back hiring and investment near term.

NFIB's uncertainty measure tracks whether owners are confident about hiring, capital spending and inventory plans. Uncertainty is high now because of big policy changes and fluctuating conditions, and it is hard for owners to commit. As a result they are being conservative, scaling plans either up or down, and many are staying on the sidelines, which leaves some open positions unfilled. Owners are weighing what will happen over the next three to six months before deciding whether to invest or pull back.

“So small business owners are really having to kind of examine what they think is going to happen in the next three to six months and whether they start investing in their business or pull back on those investments.”at 13:48

Holly Wade · NFIB (National Federation of Independent Business)

AI technology investment is a meaningful driver of US GDP growth despite small-business caution.

Asked how GDP is still growing if small businesses are scaling back, Holly points to investment in AI technology as one of the drivers. She also argues that small businesses' churn, with new firms entering and some growing into large companies, feeds GDP growth over time. The AI point is offered as a plausible driver rather than backed by quantified NFIB data, so the view is tentative.

“I think a lot of that investment in AI technology is, you know, is one of the drivers in this space.”at 25:17

Holly Wade · NFIB (National Federation of Independent Business)

Small business self-assessments fell sharply in September, a concerning shift that may not yet be a trend.

NFIB's survey question asks owners to rate their business as excellent, good, fair or poor. The answers were stable for about a year and a half, through economic changes and policy shocks. In the September report, the share rating conditions as good fell sharply toward fair. Wade says this is a bit concerning and NFIB will watch it, but one month does not make a trend. The shift is a sign of possible deterioration in small business health.

“In this last report in September, we did see a significant kind of downturn between those self assessments of good to fair. So that shift is something that we're going to be paying attention to moving forward and is a bit concerned. But it is only one month and one month certainly does not make a trend.”at 44:09

Holly Wade · NFIB (National Federation of Independent Business)

Small businesses face tight labor and rising pay pressure; more are raising compensation than planned.

NFIB survey data shows labor availability is still a major constraint, with about a quarter of small businesses citing it as their biggest challenge and historically high open positions. Far fewer firms planned pay increases than ended up having to make them, so firms are reacting to conditions on the ground. Wages are the dominant recruiting tool, with bonuses as a secondary incentive, and the pressure is squeezing margins. Hiring difficulty is most acute in construction, manufacturing and some services, especially specialised trades such as plumbers, electricians and HVAC technicians, where shortages have persisted since about 2015-2016.

“far fewer plan to increase compensation than actually have to do it. So they are having to react on changing conditions on the ground.”at 9:36

Holly Wade · NFIB (National Federation of Independent Business)

Wage growth will be strongest in services, manufacturing and construction as firms raise pay to keep and hire workers.

Asked which jobs will see the most wage growth next year, Wade points to service sectors still looking to expand, plus manufacturing and construction. Her reasoning is that these firms must raise compensation to retain their current workforce and to recruit for open positions. Small businesses have been adjusting to difficult conditions for five years, so the pressure to pay more is already building.

“I think the most wage growth will likely be in some of those service sectors that are still looking to expand their operations, manufacturing, construction again. You know, they're having to increase compensation to retain their current workforce and to recruit for those open positions.”at 42:38

Holly Wade · NFIB (National Federation of Independent Business)

Energy cost spikes are squeezing small businesses, which are absorbing them and passing them to customers.

About one in five NFIB respondents named inflation as their biggest operating challenge. Fuel costs for gasoline, diesel and fuel oil are the main pressure. Last year, when fuel was cheaper, members were already struggling and cutting fuel use to offset costs. Costs have since escalated, so firms must now adjust operations and eventually pass the higher input costs on to customers. Owners personally face these conversations, which makes pass-through stressful and sometimes contentious.

“for our members, when we ask them about those inflation pressures, so much of it really does have to do with gasoline, diesel, fuel oil and those pressures of having to absorb those higher costs and pass them along to their customers.”at 18:26

Holly Wade · NFIB (National Federation of Independent Business)

Small retailers struggle to match big-box prices because they cannot spread costs across many products.

Small businesses fear competing with larger rivals and being unable to match their prices while absorbing higher costs. Many depend on long-standing vendor relationships and find it hard to switch to cheaper suppliers, which removes an escape route. Small firms also sell narrower product ranges, so they cannot spread higher costs across a wide inventory as larger retailers can. This makes it difficult for them to absorb costs and keep customers from moving to bigger competitors.

“this is one of their biggest fears is competing with their larger competitors and not being able to be price competitive with them”at 22:55

Holly Wade · NFIB (National Federation of Independent Business)

States looking to raise revenue and tighter compliance rules are a growing concern for small businesses.

Holly says that midterm outcomes matter to small businesses mainly through taxes and regulation. Many states are looking to raise revenue, and owners fear this will hurt their ability to invest and keep profits. Owners are also increasingly worried about the time spent on compliance and regulatory requirements, which diverts attention from operations and competitiveness. The view is a qualitative read from survey comments rather than quantified data.

“But for many of the states... they're looking to raise revenues for the state and small business owners are really concerned about how that's going to impact their ability to invest in their business”at 27:59

Holly Wade · NFIB (National Federation of Independent Business)

Small-business AI adoption is rising, but incremental rather than transformative, mostly in marketing and back office.

Every new survey on small-business AI adoption shows more owners using the technology, either to keep up with competitors or to ease the strain of tight labor. Adoption is concentrated in the easiest areas to implement, such as marketing, promotion, financials and correspondence. It is becoming integral to operations but is not transformative yet, and most owners are still testing where it works. Newer businesses are expected to adopt it more readily because they can build their processes around the technology from the start, while established firms with entrenched processes are slower.

“every current one or new survey publication is showing that more and more small business owners are adopting AI technology in their business”at 29:49

Holly Wade · NFIB (National Federation of Independent Business)

Small businesses see AI augmenting staff and filling open roles through attrition, not replacing workers.

NFIB survey results show most small-business owners do not plan to replace their current workforce with AI. Instead, AI will likely take on work that currently goes unfilled because openings cannot be filled, with headcount reductions coming through attrition. A manufacturer at a recent conference said he told staff AI would not replace them, was aggressively deploying it across operations, and was encouraging workers to upskill. Owners find it challenging to motivate themselves and staff to adopt the tools, and the effort takes time away from other operations.

“It did show that for most small business owners, they weren't thinking that they were going to replace their current workforce with any AI. It'll likely come out of attrition”at 32:27

Holly Wade · NFIB (National Federation of Independent Business)

Tariffs hit manufacturers and retailers hardest, with costs rolling through and mostly absorbed by firms.

Holly says small businesses are not finding ways around tariffs and are mostly absorbing the higher costs. Tariff costs did not arrive as a single price increase but in successive waves over last summer, and some firms are still facing higher costs passed down from suppliers. Manufacturers and retailers were hit hardest, and many owners held off on raising prices until they understood the medium-term tariff levels. Many also struggled to find cheaper alternatives because of long-standing vendor relationships, so they absorbed higher input costs and then passed them on.

“I don't know that they're getting around tariffs. Many of them are just having to absorb those higher costs.”at 35:13

Holly Wade · NFIB (National Federation of Independent Business)

Data center construction is outbidding small businesses for skilled trade workers.

NFIB's Holly Wade attributes shortages of skilled construction workers and plumbers largely to the huge investment in data centers being built across the country. Large projects can compete at a higher level for workers with specific skills, which makes it very hard for small business owners to compete with large investors. She says this is what NFIB members are reporting, especially in commercial and residential construction in the heartland. She sees trade-school expansion as a fix, but a long-term one, so the squeeze on small builders is current.

“I think for some of this, it does have to do with the huge amount of investment in data centers and the construction of those across the country. And they're able to compete at a higher level for those that have those very specific skills.”at 41:14

Holly Wade · NFIB (National Federation of Independent Business)

Consumer spending is still strong, and customers keep returning despite higher prices.

Wade describes a very strong level of consumer spending that is continuing into the future. Many small businesses are not discouraged by higher prices and inflation pressures, so they keep adjusting and moving forward to take market opportunities. She says customers still seem to be coming back, which she calls a really good sign for the small business sector. Her view is that the consumer is holding up despite inflation.

“still that very strong level of consumer spending that seems to be, you know, moving forward ... for a lot of them not dissuaded by higher prices and inflation pressures ... But, you know, the customers seem to still be coming back. So that's a really good sign for the small business sector.”at 43:12