The National Federation of Independent Business (NFIB) Small Business Optimism Index reading in December marked the 24th consecutive month below the 50-year average of 98. According to the index, 23% of small business owners reported that inflation was the top concern, replacing labor quality.

Holly Wade, NFIB Director of Research, joins Yahoo Finance to discuss the index reading and give insight into how small business owners are feeling about the economy and how it may impact the broader market.

Wade explains some of the stress higher inflation has put on small businesses, which in turn gets passed to consumers: "We've seen in our survey that the first hit on inflation pressures are business owners' earnings, and so earnings have been deteriorating for a while now... so the first hit, are business owners earnings, and then they pass along those costs to their customers of their goods and services that they're selling. But that process takes a bit."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

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Editor's note: This article was written by Nicholas Jacobino

Video Transcript

JOSH LIPTON: Now with earnings season underway, we're checking in on how folks are feeling on Main Street. The answer, not great. Small business optimism came in below average in December for the 24th straight month. That's according to the National Federation of Independent Business.

Here with more on what's weighing on America's small businesses, Holly Wade, NFIB Research Center Executive Director. Holly, it is great to have you on the show. Maybe just start there, Holly, kind of the 30,000-foot view. How are small business owners feeling right now? Can you walk us through what you're seeing in the surveys?

HOLLY WADE: Sure. So thanks for having me. And small business owners are fairly pessimistic, still related to outlook on business conditions in the next six months and expansion opportunities. We've seen the same environment for about the last year and a half. And as you mentioned, our index that we have been collecting this data for 50 years now has been under the 50-year average of 98 for about two years now and has been at recessionary levels, especially over the last year with the challenging environment that they're having to operate in, with high inflation rates and still a tight labor market.

JULIE HYMAN: So when we talk about inflation, Holly, obviously, we were talking about now inflation decelerating. But if you look at prices now versus where they were three years ago, there's still a lot higher than then. So is that why inflation is so much still on the minds of these folks? And how have they adjusted?