Unfilled Job Openings Are Stinging Small Businesses

More than 60% of small business owners are finding few or no qualified applicants for job openings, according to the NFIB.
Vincent RyanOctober 18, 2021

Any hope that U.S. small businesses would begin to see a pre-autumn turnaround in their economic fortunes was dashed on Tuesday with the release of the NFIB’s Small Business Optimism Index.

The optimism index, a popular measure of small business owner sentiment, fell only 1 point for September, to 99.1, but it was the lowest reading since March. Other measures also worsened. The NFIB Uncertainty Index rose five points to 74, and the percentage of business owners expecting better business conditions over the next six months decreased five points to a net negative 33%. (The net scores represent the percentage of surveyed owners expecting better business conditions minus the percentage of owners expecting worse conditions.) The business conditions score was the worst since June 2020.

The NFIB gave several reasons for small business owners souring on the economy and their own prospects.

One, a record 51% of small business owners (seasonally adjusted) reported job openings they could not fill in September, up one point from August. This was even though a net 42% of owners reported raising compensation, up one point from August and a 48-year record high. Moreover, more than 60% said they are finding few or no qualified applicants for job openings.

Despite their frustration, owners’ plans to fill open positions remain at record-high levels, with a seasonally adjusted net 32% planning to create new jobs in the next three months.

“Owners are clearly trying to hire but are not being very successful [despite] paying higher wages,” commented the NFIB.

The second reason for small businesses’ lowered outlook is supply chain disruptions, which 67% of those surveyed said are significantly or moderately impacting their business.

“Supply chains are still in disarray, with ships and containers piling up on the coasts but only slowly being unloaded and distributed to businesses as truck drivers are in short supply,” said the NFIB.

In the meantime, at some firms, inflation is squeezing profits, a major source of operating capital. Among the owners reporting lower profits, 26% blamed the rise in the cost of materials, 23% blamed weaker sales, 19% cited labor costs, 10% cited seasonality, 6% cited lower prices, and 6% cited higher taxes or regulatory costs.

As a result of the earnings erosion, 53% of small businesses reported higher average selling prices than three months ago and a net 46% plan price hikes in the next three months.

“Inflation is running strong, but the Federal Reserve is only running away,” commented the NFIB. “Congress still doesn’t have a budget, and the debt ceiling is about to be hit.”

The good news about small businesses’ future performance is that a net 9% of owners “plan inventory investment in the coming months, down two points from August but historically a very elevated reading,” said the NFIB.

In addition, despite the overall pessimism, more than a quarter (28%) of small businesses plan capital expenditures in the next three months, a figure only 1 point below the survey’s 48-year average.

About 530 members of the NFIB responded to the September survey.

Image by Dean Moriarty from Pixabay