Labor Shortages and Inflation Fueling Small Business Pessimism

What’s going on:     

According to a survey by the National Federation of Independent Business (NFIB), small business optimism has reached its lowest point since March 2021, according to Furniture Today. Despite a slight increase in optimism in June, it remains below average for the 18th consecutive month.   

This is largely due to the challenge small business owners face when filling open positions. It’s reported that 92% of small businesses that are hiring have few or no qualified applicants for the open positions. 

Another significant concern is inflation, which is prompting businesses to raise their selling prices — especially in the retail sector. 

Why it matters:   

Despite job creation, small businesses face critical labor shortage issues and are feeling the impact of inflation on their day-to-day operations. These economic factors are collectively contributing to the diminishing optimism among small business owners and might have greater impacts on the economy as a whole.  

How it’ll impact the future:    

The labor shortage means small businesses may need to offer more competitive benefits and wages to attract and retain talent. This could be done by reshaping employment packages and work conditions. However, there is the risk of financial stress on small businesses due to inflation rates. Both factors may prompt businesses to rethink their pricing strategies, and potentially their entire business models.