While small business optimism increased slightly in August, an increasing number of owners expect business conditions to worsen.
NFIB’s monthly jobs report shows that small businesses continue to recover from the worst of the COVID-19 pandemic, but significant problems remain – such as record-high numbers of unfilled job openings.
In NFIB’s monthly Small Business Economic Trends (SBET) jobs report, the NFIB Small Business Optimism Index rose slightly, from 99.7 points in July to 100.1 in August. Of the ten components that make up the index, five metrics improved, four metrics declined, and one remained unchanged.
Owners have also grown more pessimistic with a net negative 28% expecting better business conditions over the next six months. This is an 8-point decrease from July and a 16-point decrease from June. In addition, the NFIB Uncertainty Index decreased seven points to 69. This is the lowest level recorded since January 2016, showing that owners are increasingly certain in their views.
“As the economy moves into the fourth quarter, small business owners are losing confidence in the strength of future business conditions,” said NFIB Chief Economist Bill Dunkelberg. “The biggest problems facing small employers right now are finding enough workers to meet sales demand and for many, managing supply chain disruptions.”
A major driver of this low optimism is the ongoing hiring crisis. Fifty percent of owners reported that they could not fill open positions, the highest number on record and more than twice the 48-year average of 22%. Labor quality remains the most pressing issue facing small businesses, with 28% of owners citing it as their biggest problem – a two-point increase from July and a record-high reading.
The supply chain disruptions have been a moderate to severe issue for 66% of small businesses, with the remaining 34% saying that the disruptions had a mild or no impact. More owners increased inventory in August, a four-point rise since July but still a net negative 2%.
Fifty-one percent of owners report that they have either already raised compensation or plan to do so soon to entice new employees. These wage increases translate to higher prices for customers: 36% of owners say they’ve raised prices, a 10-point increase from March and the highest reading in 40 years.
The number of owners expecting to make capital expenditures in the next few months jumped from 24% in July to 30% in August, a significant increase but still historically weak. Fifty-five percent reported capital expenditures in the last six months.
The unprecedented conditions created by the COVID-19 pandemic continue to challenge small businesses, with no end in sight. You can read the complete Small Business Economic Trends report for August 2021 here, and see this news release summarizing its key findings.
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