The National Federation of Independent Business (NFIB) has reported a significant decrease in job creation plans among American small businesses, with only 11% of them planning to hire new employees over the coming three months. This figure is the lowest since the early days of the COVID-19 pandemic in May 2020.
This trend suggests a potential slowdown in the recovery from the effects of the pandemic on the US economy. Issues such as supply chain disruptions, rising costs, and enforced closures are cited as key factors influencing this decline in confidence among small business owners.
The decrease in job creation plans has brought the index below its average, sparking concerns about the state of a high-growth economy. It is apparent that many businesses are struggling to find suitable applicants, thereby affecting their hiring strategies and resulting in intense competition for a limited pool of skilled workers.
Despite these challenges, the NFIB’s Chief Economist, Bill Dunkelberg, maintains that the competition in the business labor market for securing employees remains intense, similar to pre-pandemic conditions. He also points out that the ability to recover and rebuild businesses in the wake of the pandemic continues to be challenged by a labor shortage and high demand for workers.
Many of these businesses have thus resorted to raising wages or offering extra benefits in an attempt to attract and retain skilled labor.
Dwindling job creation in small businesses
This approach, however, is exerting a financial strain on many small business owners, especially those in sectors hardest hit by the pandemic, such as hospitality, retail, and personal services.
On a more optimistic note, Dunkelberg suggests that the labor market will eventually balance itself, despite the ongoing challenges. He emphasizes the significance of small businesses remaining adaptable and flexible, as their survival and growth depends on their ability to navigate these fluctuating labor market conditions.
Further underscoring the pressure on the labor market, 38% of small businesses have reported raising wages, while job opportunities persist primarily for skilled workers in 31% of small businesses. The NFIB study also expresses the difficulty of attracting qualified candidates, with 86% of businesses facing this problem. This data is expected to influence Federal Reserve policymakers deliberating on potential interest rate reductions later this year.
The transportation sector has seen the highest increase in job vacancies among small businesses, followed by the services and construction sectors, indicating the growing demand for labor in these sectors. In contrast, the agricultural sector has reported a slight decrease in job vacancies. Despite the rise in vacancies, many positions remain unfilled, highlighting a potential skill gap in the job market.
