Small Business Optimism Dips Amid Labor Quality and Inflation Concerns


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Small businesses are facing heightened challenges due to labor quality and inflation, according to the NFIB’s Small Business Optimism Index. The index fell 1.1 points to 89.0 in April, marking the 16th consecutive month it’s been below its 49-year average of 98.

Labor quality was cited as the top business problem by 24% of respondents, with inflation coming in a close second at 23%. “Optimism is not improving on Main Street as more owners struggle with finding qualified workers for their open positions,” NFIB Chief Economist Bill Dunkelberg said. “Inflation remains a top concern for small businesses but is showing signs of easing.”

The survey also revealed that a net negative 23% of business owners reported positive profit trends, a worsening of five points compared to March. Owners’ plans to fill open positions remain high, with a seasonally adjusted net 17% planning to create new jobs in the next three months. Moreover, a net 40% reported raising compensation, with a net 21% planning to increase compensation further in the next three months.

Inventory management has also emerged as a challenge for businesses. A net negative 5% of owners viewed current inventory stocks as “too low” in April, a drop of six points from March. The most significant shortages were reported in the manufacturing, agriculture, retail, and wholesale sectors.

The number of owners raising average selling prices dropped four points to a net 33%, the lowest since March 2021. This may signal a slight easing of inflationary pressures, which have been a persistent concern for small businesses.

On the investment front, 56% of owners reported capital outlays in the last six months, with 19% planning capital outlays in the near future. The most common expenditures were on new equipment and vehicles, as well as improvements or expansions to existing facilities.

However, not all news was negative. Only 2% of owners reported their borrowing needs were not satisfied, and 59% said they were not interested in a loan. This indicates that access to credit, while not a significant issue for most small businesses, remains a challenge for a small subset.

The NFIB Research Center has been tracking Small Business Economic Trends with surveys since 1973. The recent findings underscore the persistent challenges facing small businesses today, including labor quality, inflation, and inventory management. This calls for strategic planning and resourcefulness from business owners to navigate these difficulties successfully.

Image: Depositphotos

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  1. It’s hard to stay optimistic with all the headwinds. The government in particular seems determined to crush growth with their interest rate increases.

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