NFIB: Inflation and Labor Quality Remain Top Concerns

The National Federation of Independent Business (NFIB)’s Small Business Optimism Index increased 1.6 points in June to 91.0, however, it is the 18th consecutive month below the 49-year average of 98. Inflation and labor quality are tied as the top small business concerns with 24 percent of owners reporting each as their single most important problem.

“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.”

Key findings include:

  • Small business owners expecting better business conditions over the next six months improved 10 points from May to a net negative 40 percent, 21 percentage points better than last June’s reading of a net negative 61 percent.
  • Forty-two percent of owners reported job openings that were hard to fill, down two points from May but remaining historically very high.
  • The net percent of owners who expect real sales to be higher improved seven points from May to a net negative 14 percent.

As reported in NFIB’s monthly jobs report, 59 percent of owners reported hiring or trying to hire in June, down four points from May. Of those hiring or trying to hire, 92 percent reported few or no qualified applicants for the positions they were trying to fill.

Fifty-three percent of owners reported capital outlays in the last six months, down four points from May. Of those making expenditures, 37 percent reported spending on new equipment, 21 percent acquired vehicles, and 14 percent improved or expanded facilities.

A net negative 10 percent of all owners (seasonally adjusted) reported higher nominal sales in the past three months, down two points from May. The net percent of owners expecting higher real sales volumes improved seven points to a net negative 14 percent. A very negative outlook for the second half.

The net percent of owners reporting inventory increases decreased one point to a net negative 3 percent. Fourteen percent of owners recently reported that supply chain disruptions still have a significant impact on their business. Another 28 percent reported a moderate impact and 42 percent reported a mild impact.

Seasonally adjusted, a net 36 percent of owners reported raising compensation, down five points from May. A net 22 percent plan to raise compensation in the next three months. Eight percent cited labor costs as their top business problem, down two points from May and 24 percent said that labor quality was their top business problem.

This survey was conducted in June 2023.

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