Small Business Owners Express Great Concern for Future Business Conditions

(KNSI) — The National Federation of Independent Business Optimism Index increased slightly in May, but it was still well below average for the 17th month.

The index went up .4 points to 89.4. The 49 year average is 98. It was at or above that number last in December 2021.

It also showed small business owners expecting better business conditions over the next six months declined one point from April to a net negative 50%. Twenty-five percent of owners reported that inflation was their single most important problem in operating their business. Although state-specific data is unavailable, Minnesota’s NFIB State Director John Reynolds said, “Inflation continues to exacerbate the challenges our Main Street businesses are facing. Unfortunately, the Minnesota Legislature adjourned with little good news for small business owners, as burdensome mandates, higher taxes, and fees were all hallmarks of the session.”

The NFIB was upset about the paid leave mandate signed into law, which levies at least a .7% payroll premium tax on employers that they can pass to their employees to pay for the program. Small businesses said they’re still having trouble recovering from the pandemic, and the NFIB contends placing a new tax on business owners could force many of them to close their doors.

The number of business owners concerned about inflation was up two points from April. That was followed by labor quality concerns at 24% labor costs at 10%.

“Overall, small business owners are expressing concerns for future business conditions,” said Bill Dunkelberg, NFIB Chief Economist. “The labor force participation rate remains below pre-COVID levels, which is contributing to the shortage of workers available to fill open positions. Small businesses have a record high level of job openings currently and are working hard to fill their open positions.”

Key findings include:

Forty-four percent of owners reported job openings that were hard to fill, down one point from April and remaining historically very high.
The net percent of owners raising average selling prices decreased one point to a net 32% (seasonally adjusted), still an inflationary level but trending down.
The net percent of owners who expect real sales to be higher slid two points from April to a net negative 21%.

As reported in NFIB’s monthly jobs report, owners’ plans to fill open positions remain elevated, with a seasonally adjusted net of 19% planning to create new jobs in the next three months. Overall, 63% of owners reported hiring or trying to hire in May, up three points from April. Of those hiring or trying to hire, 89% of owners reported few or no qualified applicants for their open positions.

See the rest of the jobs report here.

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