Small businesses still struggle with inflation and labor shortages

Small businesses continue to feel the effects of inflation and struggle to find suitable workers to fill vacancies.

According to the National Federation of Independent Business, 33% of small business owners cited inflation as their top concern in October. That number is three points higher than what was reported in September.

The NFIB’s Small Business Optimism Index fell 0.8% to 91.3 in October, remaining below the 49-year moving average of 98 for 10 straight months.

“Owners continue to have a gloomy view of future revenue growth and business conditions but are still looking for new employees,” NFIB chief economist Bill Dunkelberg said in a statement.

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Small businesses continue to feel the effects of inflation and struggle to find suitable workers to fill vacancies. (Getty Images)

“Inflation, supply chain disruptions and labor shortages continue to limit the ability of many small businesses to meet demand for their products and services,” he continued.

Small business owners, who expect better business conditions over the next six months, fell two points from September to a net 46% decline, NFIB data shows. The data also showed that the net percentage of owners raising average selling prices fell one point to a net 50%, which was seasonally adjusted, and that half of all companies surveyed are raising prices due to inflation.

The NFIB’s October job report found that 46% of owners reported vacancies that were difficult to fill, just like in September. Of those owners who were hiring, 90% reported finding few or no qualified applicants for the positions they wanted to fill.

Seasonally adjusted, a net negative 8% of all owners reported higher nominal sales over the last three months, down three points from September. The net percentage of owners expecting higher real sales volume fell three points to minus 13%.

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The NFIB’s October job report found that 46% of owners reported vacancies that were difficult to fill, just like in September. Of those owners who were hiring, 90% said they had few or no qualified applicants for the positions they were looking for (AP images)

The net percentage of owners who saw inventory increase increased by one point to a net minus of 1%. A total of 16% of owners reported inventory reductions as they cautiously reduced inventory purchases.

Owners have also been impacted by the supply chain, with 31% of owners recently reporting that supply chain disruptions have had a significant impact on their business. Another 31% report a moderate impact and 27% said their business had only a mild impact. Only 10% of owners said they felt no impact from recent supply chain disruptions.

The net percentage of owners who increased average selling prices fell one point from September to a seasonally adjusted net 50%. When adjustments are not accounted for, 8% of owners reported that their average selling price was lower and 56% reported higher average selling price. Price increases were most common in retail, wholesale, construction and services.

On a net basis, 44% of owners reported a seasonally adjusted pay increase, down from September. A net 32% plan to increase compensation over the next three months, a nine-point jump from September and the highest since October 2021.

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On a net basis, 44% of owners reported a seasonally adjusted pay increase, down from September. A net 32% plan to increase compensation over the next three months, a nine-point jump from September and the highest since October 2021 (iStock / iStock)

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When asked about their biggest business problem, 10% of owners cited labor costs and 23% cited quality of work.

The frequency with which positive earnings trends were reported was a net minus 30%, up one point from September. Of those owners who reported lower profits, 34% attributed it to increases in material costs, 22% to weaker sales, 12% to labor costs, 12% to lower prices, 7% to the usual seasonal changes, and 2% to higher taxes or regulations return costs. Of those owners who reported higher profits, 47% cited sales volumes, 20% cited usual seasonal variations, and 16% cited higher prices.

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