The National Federation of independent Business (NFIB)’s Small Business Optimism Index decreased in February to 89.4, marking the 26th consecutive month below the 50-year average of 98. Twenty-three percent of small business owners reported that inflation was their single most important business problem in operating their business, up three points from last month and replacing labor quality as the top problem.
“While inflation pressures have eased since peaking in 2021, small business owners are still managing the elevated costs of higher prices and interest rates,” said Bill Dunkelberg, chief economist for NFIB. “The labor market has also eased slightly as small business owners are having an easier time attracting and retaining employees.”
Key findings include:
- Reports of labor quality as the single most important problem for business owners decreased five points to 16 percent, the lowest reading since April 2020.
- Small business owners’ plans to fill open positions continue to slow, with a seasonally adjusted net 12 percent planning to create new jobs in the next three months, the lowest level since May 2020.
- Thirty-seven percent (seasonally adjusted) of all owners reported job openings they could not fill in the current period, down two points from January and the lowest reading since January 2021.
- As reported in NFIB’s monthly jobs report, 56 percent of owners reported hiring or trying to hire in February. Twenty-five percent of owners reported few qualified applicants for their open positions and 26 percent reported none.
The net percent of owners raising average selling prices declined one point from January to a net 21 percent (seasonally adjusted), the lowest reading since January 2021. Twenty-three percent of owners reported that inflation was their single most important problem in operating their business, replacing labor quality as the top problem.
Seasonally adjusted, a net 35 percent reported raising compensation, down four points from January and the lowest reading since May 2021. A seasonally adjusted 19 percent plan to raise compensation in the next three months, down seven points from January and the lowest since March 2021.
Eleven percent cited labor costs as their top business problem, up one point from January and only two points below the highest reading of 13 percent reached in December 2021. Sixteen percent said that labor quality was their top business problem, the lowest reading since April 2020.