Small business survey: Optimism up, but so are inflation and labor concerns

William Dunkelberg

A measure of optimism among small business owners continues to increase, but so do concerns about inflation and labor shortages.

“Inflation is at the highest level since the 1980s and is having an overwhelming impact on owners’ ability to manage their businesses,” said Bill Dunkelberg, chief economist of the National Federation of Independent Business.

The NFIB reported its Small Business Optimism Index rose a half point to 98.9 in December. 

The small business advocacy group bases the index on the results of monthly surveys of members, most of them small business owners. For December, seven of 10 components of the index advanced and three retreated.

The proportion of those responding to the survey upon which the December index was based who expect the economy to improve in coming months rose three points from November. But at a net negative 35 percent,  more respondents anticipated worsening conditions. The reading has dropped 23 points over the past six months.

A net 29 percent reported plans to make capital outlays, up two points. A net 11 percent said they consider now a good time to expand, up a point.

A net 28 percent reported plans to increase staffing, up three points. A net 49 percent reported unfilled job openings, up a point.

Asked to identify their single most important business problem, 22 percent of those who responded cited inflation. That’s a 20-point increase from the beginning of 2021 and the highest level since 1981. At 25 percent, an even bigger proportion cited quality of labor. Another 13 percent cited the cost of labor, a record-high reading.

A net 48 percent of survey respondents reported raising compensation, up four points from November to a record level. A net 32 percent said they expect to raise compensation in the next three months.

The share of those who said they expect more sales rose a point to a net 3 percent.

The share of those reporting higher earnings rose three points. But at a net negative 14 percent, a bigger share reported lower earnings. Of those reporting higher earnings, 63 percent credited stronger sales and 15 percent cited higher prices. A net 57 percent of responded reported raising average selling prices, up two points. Of those reporting lower earnings, 29 percent blamed higher materials costs and 22 percent cited weaker sales.

A net 8 percent reported plans to increase inventories, down two points. A net 9 percent said they consider current inventories too low, down six points.