Small business optimism falls but so does uncertainty as owners face significant labor shortage and supply chain disruption challenges.
NFIB’s monthly Small Business Economic Trends (SBET) report found that in October the number of owners expecting business conditions to improve in the near future has fallen to the lowest level in 9 years. The NFIB Small Business Optimism Index also decreased slightly in October.
“Small business owners are attempting to take advantage of current economic growth but remain pessimistic about business conditions in the near future,” said NFIB Chief Economist Bill Dunkelberg. “One of the biggest problems for small businesses is the lack of workers for unfilled positions and inventory shortages, which will continue to be a problem during the holiday season.”
Small business owners expecting better business conditions over the next six months fell four points to a net negative 37%. This indicator has declined dramatically since the summer, falling 17 points since July.
The report showed a 0.9-point decrease in small business owners’ optimism, bringing the monthly Optimism Index to 98.2. Seven of 10 Index components decreased while one increased and the remaining two remained the same. In addition, the NFIB Uncertainty Index decreased by seven points to 67 as more owners are certain that challenges in operating their business will persist in the short-term.
A major challenge for small businesses this year is the ongoing and unprecedented labor shortage. Forty-nine percent of owners reported job openings that could not be filled, a two-point decrease from the record high number in September’s report. Despite this slight decline, the number of owners with unfilled positions is still more than double the 48-year-historical average of 22%.
Another key finding is the number of owners who have raised compensation to attract additional employees, a net 32%.
Fifty-six percent of owners reported capital outlays in the last six months, up three points from September. The most common source of spending was on new equipment (40%), followed by new vehicles (24%) and expanded facilities (14%). Another 31% plan capital outlays in the next few months, up three points from September.
Thirty-nine percent of owners report supply chain disruptions have had a significant impact on their business, a four-point increase from September. Another 32% report a moderate impact (up 3 points) and 21% report a mild impact (no change).
You can read the full monthly Small Business Economic Trends report including the October Jobs Report here.
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