The May NFIB Small Business Optimism Index releases at 6:00 ET Tuesday morning, the first data point of the week and the only fresh small-business read inside the FOMC communications blackout ahead of the June 17 to 18 meeting. The headline index print is not the line that matters. Two subindexes inside the release carry the signal.
Compensation plans, the only fresh wage line of the week
The compensation-plans subindex measures the net percentage of small-business owners planning to raise worker compensation in the next three months. It sat at 18% in April, down from a peak of 32% in late 2022 and roughly in line with the 17% pre-pandemic average. The series leads the Employment Cost Index by roughly two quarters and is the single private-data labor cost line that prints between Friday’s 0.2% average hourly earnings read and the June 26 Q1 ECI final.
A May reading at 16% or below corroborates the wage-cooling case Friday’s NFP opened. A print at 20% or higher is the first material upside since the early-tariff window in February, and it pulls the September cut probability back from 79% toward the 65% range the curve sat at before the payrolls revision pattern broke. The 3-year Treasury auction at 1:00 ET is the cleanest market-side read on how the curve digests both prints.
Cost-of-inputs as single most important problem
April was the first month since mid-2022 in which cost of inputs replaced quality of labor as the single most important problem cited by respondents, at 24% versus 22%. That flip lines up with ISM Manufacturing prices-paid at 65.7 in April and 64.2 in May, and with the April import-price index ex petroleum at 0.7% month-over-month, the largest single-month move since early 2019.
A second month with inputs leading would be the cleanest small-business confirmation that tariff pass-through is still in its acceleration phase rather than spreading evenly over the next two quarters. That is the prior Wednesday’s core goods ex used vehicles print in CPI either confirms or breaks.
What sets the bar for Wednesday
The cut-friendly NFIB configuration is compensation plans at 16% or below, cost of inputs falling back behind labor as the top problem, and the headline index ticking above 95. The cut-unfriendly configuration is compensation plans at 20% or above, inputs widening its lead at the top of the problem list, and the headline staying below 94. Either way, the print is read alongside CPI Wednesday, not on its own.
The headline index has run below its 52-year average of 98.0 for twenty consecutive months. A reading above 97 for the first time since 2023 would be a sentiment story. The two subindexes above are the policy story.