According to a new report from the National Federation of Independent Business (NFIB), optimism in small business owners is falling in the face of inflation.
In the NFIB’s Small Business Optimism Index, 23 percent of small business owners reported that inflation was the single most important business problem in operating their business, a three point increase over last year. The report found that inflation replaced labor as the top problem for those businesses.
“While inflation pressures have eased since peaking in 2021, small business owners are still managing the elevated costs of higher prices and interest rates,” NFIB Chief Economist Bill Dunkelberg said. “The labor market has also eased slightly as small business owners are having an easier time attracting and retaining employees.”
Labor quality as an issue for business owners decreased five points to 16 percent, the lowest rate since April 2020. Those business owners who reported planning to fill open positions fell to 12 percent, the lowest level since May 2020. However, 37 percent of owners reported having job openings they couldn’t fill, down two points from January and the lowest level since January 2021. According to the report, 56 percent of owners reported hiring or attempting to hire in February. A quarter (25 percent) of those owners said they had few qualified applicants for their open positions, and 26 percent reported they had none.
However, the percentage of owners expecting their sales to be higher increased six points to a net negative 10 percent, an improvement from last month, officials said. And the number of owners reporting that they will raise selling prices declined one point to net 21 percent, the lowest reading since January 2021.
Overall though, the report found that the NFIB Small Business Optimism Index decreased to 89.4 percent in February, the 26th consecutive month below the five-year average of 98.