The job market continues to pose significant challenges to the small business economy, as per the latest monthly jobs report by the National Federation of Independent Business (NFIB). Close to half, or 42%, of small business owners reported job openings they could not fill in the current period, highlighting the severity of the ongoing labor shortage.
The issue of labor quality continues to be a significant concern, with 23% of small business owners identifying it as their primary operational problem, a slight decrease from June’s figures. Adding to the challenge, labor costs are increasingly becoming a significant issue for business owners, with 10% reporting it as the single most important problem, up by two points from the previous month.
“The small business economy continues to struggle with the current job market, with owners working hard to fill open positions,” said NFIB Chief Economist Bill Dunkelberg. “Hiring plans are trending down but are still historically strong in the face of a weakening economy.”
Despite the challenges, small business owners’ plans to fill open positions remain high. A seasonally adjusted net 17% plan to create new jobs in the next three months, up two points from June. However, this figure is significantly lower than the record high of 32% recorded in August 2021.
In July, 61% of owners reported hiring or attempting to hire, a slight increase from June. However, finding suitable candidates continues to be a challenge. Of those trying to hire, 92% reported few or no qualified applicants for their open positions, an increase of two points from the previous month. 33% of owners reported few qualified applicants for their open positions, while 23% reported none.
In an attempt to attract suitable candidates, a net 38% of owners reported raising compensation, up two points from June’s lowest reading since May 2021. Additionally, a net 21% plan to raise compensation in the next three months, albeit this is a one-point decrease from June.
The report further revealed that 36% of owners have job openings for skilled workers and 18% for unskilled labor. It underscores that labor supply and quality remain supply-side constraints to more growth.
This report illuminates the mounting pressure on small businesses as they navigate the challenging job market. Business owners must be proactive and innovative in their hiring strategies to attract qualified employees and maintain their operations amidst the current economic climate.
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It’s crazy how robust the job market has been despite the government’s efforts to slow it down. Here’s hoping that SMBs can keep finding people to fill those positions.