Small Business Owners Remain Concerned with Inflation and the Labor Market

July 19, 2023

Recent reports show current economic conditions have small business owners pessimistic about future business conditions

Small Business Owners Remain Concerned with Inflation and the Labor Market

According to NFIB’s Small Business Economic Trends report, small business owners continue to face challenging economic conditions. The Small Business Optimism Index increased slightly by 1.6 points in June but remains below the 49-year average of 98 for the 18^th consecutive month. Labor market concerns and inflation are at the forefront of small business owners’ worries, with 24% of owners reporting inflation and another 24% citing labor quality as their top business concern. “Halfway through the year, small business owners remain very pessimistic about future business conditions and their sales prospects,” said NFIB Chief Economist Bill Dunkelberg. “Inflation and labor shortages continue to be great challenges for small businesses. Owners are still raising selling prices at an inflationary level to try to pass on higher inventory, labor, and energy costs.” According to NFIB’s monthly jobs report, 59% reported hiring or trying to hire in June, down 4 points from May. A seasonally adjusted 42% of owners reported job openings they could not fill in June. This trend is especially pronounced in the manufacturing, construction, and transportation sectors. Of the 59% of owners who reported hiring or trying to hire in June, 92% had few or no qualified applicants for the positions they were trying to fill. Thirty-three percent of owners reported few qualified applicants for their open positions, and 21% reported none. Despite labor-related issues, small business owners continue to look for ways to grow their companies. An elevated net 15% of owners plan to create new jobs in the next few months, down four points from May. Attracting and retaining applicants is a priority for small business owners, with a net 22% of owners planning to raise compensation in the next three months, unchanged from May. Over the next six months, a net negative 40% of owners expect better business conditions, which is a 10-point increase. A net negative 10% of owners reported higher nominal sales in the past three months, down two points from May. A seasonally adjusted net 29% of owners reported raising average selling prices in June. Although this is three points lower than in May and the lowest since March 2021, this number is still at an inflationary level. Forty-three percent of owners reported higher average prices in June with price hikes most frequent in the retail, construction, and wholesale sectors. 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 June 2023.

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