The NFIB Small Business Optimism Index dropped 3.3 points in March to 97.4, falling below the 51-year average of 98, according to the National Federation of Independent Business.

The report shows that small business owners continue to rank taxes as a top concern, with 18% citing it as their most important problem—up two points from February and the highest level since November 2021. Labor quality remained the top issue at 19%.

“The implementation of new policy priorities has heightened the level of uncertainty among small business owners over the past few months,” said NFIB Chief Economist Bill Dunkelberg. “Small business owners have scaled back expectations on sales growth as they better understand how these rearrangements might impact them.”

The percentage of owners expecting better business conditions dropped 16 points to a net negative 21%, the largest monthly decline since December 2020.

Other key findings include a net 3% of owners expecting higher real sales volumes, down 11 points from February. Profit trends worsened, with a net negative 28% reporting positive profit trends, four points lower than the previous month.

A seasonally adjusted 40% of small businesses reported job openings they could not fill, up two points from February, while 87% of those hiring said they received few or no qualified applicants.

On the financial front, 28% of owners reported borrowing regularly, a four-point increase from February. A net 6% said their last loan was harder to obtain—the highest monthly jump since September 2023.

Inflation was cited by 16% of owners as the most important problem, unchanged from February. Meanwhile, the net percentage of owners raising average selling prices dropped six points to 26%, the largest monthly decrease since December 2022.

The survey, conducted in March, reflects responses from randomly selected NFIB members. The NFIB has collected small business economic data through monthly surveys since 1986.