The Economy

Small Business Optimism Declines to 89.0 in April

“Optimism is not improving on Main St. as more owners struggle with finding qualified workers for their open positions,” NFIB's Bill Dunkelberg said.
David HoffmanMay 10, 2023
Small Business Optimism Declines to 89.0 in April

Small business owners said finding and retaining talent remains their top concern, according to the National Federation of Independent Business (NFIB). The NFIB’s Small Business Optimism index continued its downward trend in April, where the index came in at 89.0, a 1.1 point drop from last month, marking over a year of recessionary levels for the index. Twenty-four percent of respondents listed labor quality as their top business problem.

“Optimism is not improving on Main Street as more owners struggle with finding qualified workers for their open positions,” said NFIB Chief Economist Bill Dunkelberg.

The Bureau of Labor Statistics (BLS) last week reported higher than expected job growth, with 253,000 new jobs added in April, and an unemployment rate of 3.4%. But the NFIB’s survey of labor markets indicated that 45% of business owners had difficulty filling job openings, a two-point increase over last month. Openings for skilled workers increased by three points to 37%, and unskilled job openings remained constant at 19%.

Construction, transportation, and manufacturing companies reported the most difficulty in finding workers, while the financial sector had the fewest openings. The survey indicated that employers anticipate a higher than usual number of positions to fill in the next three months.

Twenty three percent of respondents listed inflation as their top problem, although the seasonally adjusted net percent (33%) of owners raising average selling prices decreased four points from the previous month. Construction, retail, wholesale, and finance were the industries that saw the highest price increases. Going forward, a seasonally adjusted 21% of owners plan price hikes. “Inflation remains a top concern for small businesses but is showing signs of easing,” Dunkelberg said.

The Consumer Price Index (CPI) for All Urban Consumers rose by 0.4% in April, an acceleration from 0.1% percent in March. Overall, the CPI has seen consumer prices increase by 4.9% over the last 12 months.

In CFO’s Q1 Outlook survey, more than three quarters of respondents said they planned to face inflation by cutting costs or cutting products. Thirty-nine percent said they would look towards cash flow optimization.

This month’s index also found that profits continue to trend downward, with reports of positive profit trends decreasing at a rate of 5% since last month, for a net negative of 23%. The owners surveyed attributed the lower profits to weaker sales (29%), increasing cost of materials (20%), routine seasonal variability (10%), lower prices (9%), and higher taxes or regulatory costs. Those who saw profits increase attributed it to credited sales volume (51%), higher prices (16%), usual seasonal change (15%), and lower labor costs (4%).

While the economy continues to grow, GDP growth has slowed to a 1.1% annual rate. While the labor demand is fueled by consumer spending, it has been satisfied by reducing existing inventories rather than new production. 

In addition to the outlook for hiring, the NFIB Small Business Optimism Index is comprised of surveys that measure SMB owners’ outlook regarding capital outlays, increasing inventories, expectations regarding economic improvement, real sales, current inventory, credit conditions, conditions for expansion and earnings trends.