Optimism ticks up in December, but serious problems for small business recovery remain
NFIB’s monthly Small Business Economic Trends report shows that small business optimism increased slightly, although significant problems remain – most importantly high levels of inflation as well as the ongoing staffing shortage.
“Small businesses unfortunately saw a disappointing December jobs report, with staffing issues continuing to impact their ability to be fully productive,” said NFIB Chief Economist Bill Dunkelberg. “Inflation is at the highest level since the 1980s and is having an overwhelming impact on owners’ ability to manage their businesses.”
The NFIB Small Business Optimism Index increased slightly from 98.4 in November to 98.9 in December. Of the ten components that make up the index, seven metrics improved while three declined.
Twenty-two percent of business owners reported that inflation was the single most important problem they faced, a 20-point increase from the beginning of 2021 and the highest level recorded in over 40 years.
The staffing shortage that was one of the biggest problems for small businesses throughout 2021 continues, with 25% of owners calling labor quality their top business problem in December. Thirteen percent of owners reported labor costs as their top business problem, a 3-point increase from November and the highest reading ever recorded in the 48 years that NFIB has been polling owners.
Forty-nine percent of owners reported that they could not fill open positions, an increase of one point from November. The number of owners reporting unfilled positions increased steadily through 2021, peaking at 51 percent in September before dropping slightly in October and November.
Slightly more owners say they expect better business conditions over the next six months, although a net 35% still believe conditions will worsen. Owners remain pessimistic about future economic conditions as this indicator has declined 23 points over the past six months.
A record was set in the number of employers raising employee compensation, as firms continue to try to attract more applicants for open positions. A net 48% have already raised compensation (4 points up from November) and a net 32% intend to do so in the next three months (unchanged from November), both 48-year record highs.
Most owners (57%) report that they have made capital outlays in the last six months, up 2 points from November. The most common purchases were on new equipment (41%), followed by new vehicles (25%) and expanded facilities (19%).
Thirty-six percent of owners report that supply chain disruptions have had a significant impact on their business, with another 51% reporting a “moderate” or “mild” impact. Altogether, fewer owners are reporting “too low” inventory stocks, a net 9% compared to a net 15% in November.
The percent of owners who said they’ve recently increased their selling prices remains high at a net 57%, but it is 2 points lower than in November. By industry, wholesale (net 85%) was the industry which reported price hikes the most consistently, followed by construction (net 69%) and retail (net 63%).
Read the complete Small Business Economic Trends report for December 2021 here, and see this news release summarizing its key findings. The December 2021 Jobs Report can be viewed here, and a news release on the report is here.
Take Action: If you own a small business and fear that new taxes and mandates will hurt your recovery, urge your Members of Congress to vote no on any tax increases and new mandates for small businesses.