Small Business Optimism Soars Once Again Despite Hiring Troubles
Remember when small business optimism took a bit of a dip after logging a record 2017? Well, May told a different story as the National Federation of Independent Business’s (NFIB) optimism index soared to impressive levels. Not only did the index gain three points to reach 107.8 but that figure also marks the second highest level in the study’s 45-year history.
In addition to the headline index gain, there were a number of other positive signs to come out of the NFIB’s latest report. For example the number of businesses planning to hire, make capital outlays, and increase inventories all rose in May. Additionally a greater number of business owners said they expected the economy to improve than did in April, with many also stating that now was a good time to expand. Lastly the NFIB found that 19% of those surveyed said they planned to raise prices — the highest percentage since 2008.
However there is one potential problem facing business owners these days: a lack of skilled workers. For the fifth month in a row, entrepreneurs ranked “labor quality” as the top issue facing their companies. Meanwhile nearly one-third of owners have open positions they’re struggling to fill. As a result 12% of small businesses report utilizing temporary workers.
Among those business owners searching for help is Mike Fredrich, who told CNBC, “There are no workers, but there’s a huge demand. The economy has picked up, but the market is so thin, that we just can’t find them. We’ve gone to extraordinary means to find people that will actually work, including going to the local county jail and recruiting people to work from inside the jail.” Fredrich is not alone, as Small Business & Entrepreneurship Council chief economist Raymond Keating explains, “Finding the right person for the job is always a challenge, but obviously in a tighter market like this, it becomes far more difficult. It’s a function of a few things — the labor participation rate is fairly low for an economic recovery expansion period. So there’s room for people to come back into the labor force. And, as long as economic growth continues, which we want to happen, we are going to have to deal with some tight labor markets.”
Despite the challenges of hiring, it’s clear that many small businesses are flourishing in the current economy. Surely it also helps that consumer spending was up significantly in May, which may have played a role in the increased sales many businesses saw. The result is a continued cheery outlook that few might have expected given the already record-highs of late. With that, perhaps it’s once again premature to ask “how much better can things get?”