New Report: Inflation, Labor Quality Remain Top Problems for Small Business Owners

Date: April 19, 2023

NFIB Small Business Optimism Index fell slightly and remains well below historical average

NFIB’s March Small Business Economic Trends (SBET) report found that inflation remains the top problem facing small business owners, with 24% reporting that inflation is their single biggest problem, a four-point drop from February. A net negative 47% of owners said they expected better business conditions over the next six months. 

“Small business owners are cynical about future economic conditions,” said NFIB Chief Economist Bill Dunkelberg. “Hiring plans fell to their lowest level since May 2020, but strong consumer spending has kept Main Street alive and supported strong labor demand.” 

Meanwhile, NFIB’s March Jobs report found that 23% of small business owners name labor quality as their top business problem, just one point behind inflation. This makes labor quality the second-most challenging issue facing owners. Eleven percent of owners cite labor costs as their top business problem.  

The NFIB Small Business Optimism Index fell 0.8 points in March to 90.1. This is the fifteenth consecutive month below the 49-year average reading of 98.  

The percentage of small business owners who reported job openings that they could not fill in March decreased four points to 43%, almost double the historical average of 23%. The Jobs report showed that 34% of owners have open positions for skilled workers while 19% have openings for unskilled workers. 

Fifty-nine percent of small business owners reported hiring or trying to hire in March, a one-point decrease from February. Of those owners, 90% reported few or no qualified applicants for the positions they were trying to fill. A net 15% of owners plan to create new jobs in the next three months.   

The net percentage of small business owners raising average selling prices decreased one point to a net 37%. In addition, a net 37% of owners intend to raise their prices in the near future, a one-point decrease from February. A net 42% of owners report raising employee compensation, a six-point decrease from February. Another net 22% report that they intend to raise compensation in the next three months. As labor costs remain high, so do prices, passing the cost of compensation increases onto consumers. 

The net percentage of owners who expect real sales to be higher in the next three months decreased six points from February to a net negative 15%. In addition, a net negative 6% of owners reported higher nominal sales in the last three months, a three-point increase from February.  

You can read the full monthly Small Business Economic Trends report here andread the full monthly Jobs report here.  

Take Action: If your small business has struggled to find qualified employees for your open positions, then share your story with lawmakers by filling out this survey. 

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