December Jobs Report Shows Inflation Surpassing Labor Quality as Top Concern

Date: January 17, 2024

Inflation returns as a top business concern, and 40% of small business owners reported unfilled jobs, unchanged from November

Small business owners continue to be concerned with inflation as it returned to being small business owners’ top concern, replacing labor quality. In the December NFIB Small Business Economic Trends survey, the NFIB Small Business Optimism Index increased 1.3 points to 91.9. This is the 24th consecutive month below the 50-year average of 98. The last time the Index was at or above the average was in December 2021.  

“Small business owners remain very pessimistic about economic prospects this year,” said NFIB Chief Economist Bill Dunkelberg. “Inflation and labor quality have consistently been a tough complication for small business owners, and they are not convinced that it will get better in 2024.” 

Key findings of the report include: 

  • Small business owners expecting better business conditions over the next six months increased six points from November to a net negative 36% (seasonally adjusted). 
  • A net negative 11% of all owners (seasonally adjusted) reported higher nominal sales in the past three months, a six-point improvement from November. 
  • Forty percent (seasonally adjusted) of owners reported job openings that were hard to fill, unchanged from November. 
  • Seasonally adjusted, a net 29% of owners plan to raise compensation in the next three months, down one point from November. 
  • The net percentage of owners raising average selling prices was unchanged from November at a net 25% (seasonally adjusted). 
  • The net percentage of owners who expect real sales to be higher increased four points from November to a net negative 4% (seasonally adjusted), the highest reading since January 2022. 

As reported in NFIB’s monthly jobs report, owners’ plans to fill open positions remain elevated with a seasonally adjusted net of 16% planning to create new jobs in the next three months, down two points from November. Overall, 55% reported hiring or trying to hire in December. Of those hiring or trying to hire, 89% of owners reported few or no qualified applicants for the positions they were trying to fill.  

The net percentage of owners reporting inventory gains increased one point to a net negative 2%. Not seasonally adjusted, 12% reported increases in stocks, and 15% reported reductions. A net negative 5% of owners viewed current inventory stocks as “too low” in December, down five points from November. By industry, shortages are reported most frequently in the finance (16%), retail (12%), and manufacturing (11%) sectors. A net negative 5% of owners plan inventory investment in the coming months.  

Price hikes were the most frequent in finance (52% higher, 12% lower), retail (49% higher, 8% lower), construction (41% higher, 12% lower), services (36% higher, 5% lower), and professional services (33% higher, 4% lower). Twenty-three percent of owners reported that inflation was their single most important problem in operating their business, up one point from November and surpassing labor quality as the top problem.  

Seasonally adjusted, a net 36% reported raising compensation, unchanged from November. A net 29% (seasonally adjusted) plan to raise compensation in the next three months. Nine percent of owners cited labor costs as their top business problem, up one point from November. Twenty percent said that labor quality was their top business problem. 

A net negative 11% of all owners (seasonally adjusted) reported higher nominal sales in the past three months, a six-point improvement from November. The net percentage of owners expecting higher real sales volumes improved two points to a net negative 4%. 

The NFIB Research Center has collected Small Business Economic Trends data with quarterly surveys since the fourth quarter of 1973 and monthly surveys since 1986. Survey respondents are randomly drawn from NFIB’s membership. The report is released on the second Tuesday of each month. This survey was conducted in December 2023. 

The full Small Business Economic Trends report along with the NFIB Jobs Report are available for further analysis.  

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