Labor Quality Becomes Top Small Business Problem

The National Federation of Independent Business (NFIB)’s Small Business Optimism Index decreased by 1.1 points in April to 89.0. This marks the 16th consecutive month below the survey’s 49-year history of 98. Labor quality was the top business problem at 24 percent, with inflation in second place by one point at 23 percent.

“Optimism is not improving on Main Street as more owners struggle with finding qualified workers for their open positions,” said Bill Dunkelberg, chief economist for NFIB. “Inflation remains a top concern for small businesses but is showing signs of easing.”

As reported in NFIB’s monthly jobs report, owners’ plans to fill open positions remain elevated, with a seasonally adjusted net 17 percent planning to create new jobs in the next three months. Seasonally adjusted, a net 40 percent reported raising compensation. A net 21 percent plan to raise compensation in the next three months. Nine percent cited labor costs as their top business problem and 24 percent said that labor quality was their top business problem.

Fifty-six percent of owners reported capital outlays in the last six months, down one point from March. Of those making expenditures, 40 percent reported spending on new equipment, 23 percent acquired vehicles, and 11 percent spent money on new fixtures and furniture.

A net negative 5 percent of owners viewed current inventory stocks as “too low” in April, down six points from March. Shortages in construction (6 percent) have been reduced because home sales have slowed dramatically due to higher interest rates.

The net percent of owners raising average selling prices decreased four points from March to a net 33 percent (seasonally adjusted), the lowest since March 2021. Unadjusted, 12 percent reported lower average selling prices and 48 percent reported higher average prices. Price hikes were the most frequent in construction (59 percent higher, 7 percent lower), retail (59 percent higher, 8 percent lower), wholesale (54 percent higher, 14 percent lower), and finance (52 percent higher, 5 percent lower).

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 April 2023.

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