The National Federation of Independent Business’s small business optimism index remained below average for the sixth straight month in June as owners continue to grapple with inflation and labor shortages.
The index dropped 3.6 points in June, to 89.5, below the study’s 48-year average of 98. After reaching a record high in May, the net percentage of small business owners raising average selling prices fell 3 points to 69 percent. The percentage of owners expecting better conditions dropped seven points to a record low.
Thirty-four percent of owners said inflation was their No. 1 obstacle in operating their business in June, a six-point increase from May and the highest percentage since the fourth quarter of 1980. According to the U.S. Bureau of Labor Statistics, inflation was at 8.6 percent in May, the largest year-over-year increase since December 1981.
Labor shortages are especially evident in construction, manufacturing, services and retail. Nearly every small business owner who was either hiring or trying to hire reported few or no qualified applicants for the positions. Half of owners reported job openings that could not be filled. Forty-two percent have openings for skilled workers, and more than one-in-five have openings for unskilled labor. A seasonally-adjusted net 19 percent of owners plan to create new jobs in the next three months, a seven-point drop from May.
Nearly 40 percent of owners said supply chain disruptions had significantly impacted their business. Another 30 percent reported a moderate impact, with slightly fewer saying there was a mild impact.
According to the NFIB, declines in the net percent of owners expecting better business conditions, sales growth and improved credit conditions as high inflation continues indicate a potential downturn in economic activity.
“How long and how severe is now the question,” the NFIB stated. “It appears that real GDP growth was negative in the first two quarters of this year; some say that is a recession. But employment has yet to yield to the forces of decline, a good sign. However this plays out, small business owners are bracing for challenging times ahead.”