Small business optimism stunted due to inflation, worker shortage

Small business optimism remains historically low as high inflation and ongoing labor shortages continue to hamper the economy, according to the National Federation of Independent Business’ July Small Business Economic Trends report. 

The NFIB’s Optimism Index increased by less than a half-point to 89.9, the seventh straight month the reading has been below the 48-year average of 98.

“Uncertainty in the small business sector is climbing again with more owners unsure of what’s coming their way,” the NFIB stated. “The news is dominated by recession talk. But labor shortages remain challenging. The stock market has posted significant losses this year. Food and housing are in shorter supply and very expensive.” 

According to the report, 37 percent of owners said inflation was their No. 1 problem in running their business, up three points from June and the highest level since the end of 1979. According to the U.S. Bureau of Labor Statistics, the Consumer Price Index was at 9.1 percent in June, the largest year-over-year increase since December 1981, before decreasing slightly to 8.5 percent last month. 

A shortage of workers remained a top concern, especially in the transportation, construction, manufacturing and wholesale sectors. Nearly half of owners reported job openings that could not be filled. Fifty-seven percent of owners who were hiring or trying to hire reported there being either few or no qualified applicants. Forty-two percent had openings for skilled workers, and 21 percent said the same for unskilled labor. Still, the current level of openings is more than 20 percentage points higher than the historical average.

Owners anticipating better business conditions over the next six months increased by 9 points from June’s record low, to a net-negative 52 percent. The NFIB’s uncertainty index increased 12 points from June to 67. Nearly a third of owners said supply chain disruptions had a significant impact on their businesses. Thirty-six percent reported a moderate impact. 

The net percent of owners increasing their average selling prices fell seven points to a net seasonally-adjusted 56 percent. The net percent of owners who expect real sales to be higher dropped slightly to a net-negative 29 percent, “a very bearish outlook,” according to NFIB.