Small business optimism up, but so are labor concerns

William Dunkelberg

A monthly measure of optimism among small business owners has increased, but so have concerns over finding qualified employees to fill job openings.

The National Federation of Independent Business reported its Small Business Optimism rose 2.4 points in March to 98.2. With the gain, the index topped its 47-year average of 98 for the first time since November.

Bill Dunkelberg, chief economist of the NFIB, said small businesses have fared better as state and local pandemic restrictions have eased. 

“But finding qualified labor is a critical issue for small businesses nationwide,” Dunkelberg said. “Small business owners are competing with the pandemic and increased unemployment benefits that are keeping some workers out of the labor force. However, owners remain determined to hire workers and grow their business.”

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 March, seven of 10 components of the index advanced and three retreated.

The proportion of those who responded to the survey upon which the March index was based who expect the economy to improve over the next six months rose three points from February. But at a net negative 3 percent, more respondents said they expected worsening conditions.

A net 20 percent of those who responded reported plans for capital outlays, down three points. A net 11 percent said they consider now a good time to expand, up five points.

A net 22 percent said they plan to increase staffing, up four points. A net 42 percent reported unfilled job openings, up two points to a record-high reading.

Asked to name their single most important problem, 24 percent cited the quality of labor, ahead of taxes, government regulations and poor sales.

The proportion of those expecting higher sales over the next three months rose eight points to a net 0 percent.

A net 4 percent reported plans to increase inventories, up two points. A net 3 percent said they consider current inventories too low, down two points.

The share of respondents reporting higher earnings fell four points to a net negative 15 percent. Among those reporting lower earnings, 46 percent blamed weaker sales, 15 percent cited seasonal changes and 10 percent said material costs had increased.