A measure of optimism among small business owners has retreated even as a growing proportion of them struggle to fill job openings.

The National Federation of Independent Business reported its Small Business Optimism Index fell two-tenths of a point to 99.6 in May.

“The labor shortage is holding back growth for small businesses across the country,” said Bill Dunkelberg, chief economist of the NFIB. “If small business owners could hire more workers to take care of customers, sales would be higher and getting closer to pre-COVID levels.”

Other challenges persist, Dunkelberg said. “Inflation on Main Street is rampant, and small business owners are uncertain about future business conditions.”

The NFIB bases the index on the results of monthly surveys of members of the small business advocacy group, most of them small business owners.

For May, five of 10 components of the index advanced, three retreated and two remained unchanged.

A record 48 percent of those who responded to the survey upon which the May index was based reported unfilled job openings, up four points from April. 

Asked to name their single most important business problem, 26 percent cited labor quality and 8 percent cited labor costs.

A net 27 percent reported plans to increase staffing, up six points.

A net 34 percent reported raising compensation, the highest level in a year. A net 22 percent said they expect to raise compensation in the next three months.

Meanwhile, the share of those who expect the economy to improve dropped 11 points. At a net negative 26 percent, more respondents indicated they expect worsening conditions.

A net 27 percent reported plans to make capital outlays, unchanged from April. A net 13 percent said they consider now a good time to expand, down a point.

The proportion of respondents reporting higher earnings fell four points. At a net negative 11 percent, more reported lower earnings.

Of those reporting lower earnings, 38 percent blamed weaker sales. Of those reporting higher earnings, 60 percent cited increased sales. 

A net 2 percent said they expect higher sales over the next three months, up a point.

A net 6 percent reported plans to increase inventories, up a point. A net 8 percent said their inventories are too low, also up a point.