Small Business Still Wants More Workers

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Matt Rourke/Associated Press

US consumers are feeling the pain of rising inflation and interest rates, but they still have ample income-earning opportunities. Small businesses are eagerly looking for workers and are also increasing compensations to attract them. That’s according to the National Federation of Independent Business’ May jobs report, to be released later today.

NFIB Chief Economist William Dunkelberg reports:

Small businesses continue to raise wages to retain employees and fill historically high levels of vacancies. Twenty-three percent said quality of work was their top business concern, unchanged from April and still second only to inflation. Twelve percent named labor costs as their top business concern, up 4 points from April and just one point below December’s 48-year record high. Labor shortages continue to hamper small business economies as owners compete for labour.

Although more firms in the survey reported a fall in employment than an increase (possibly reflecting in part the historically high rate of workers quitting their jobs), average employment rose by 0.04 workers per firm. According to NFIB:

Fifty-one percent (seasonally adjusted) of all owners reported vacancies they were unable to fill in the current period, up 4 points from April and hitting September’s 48-year record high. The vacancy rate is well above the 48-year historical average of 23 percent. Nationwide, the number of job offers continues to outstrip the number of unemployed (jobseekers), resulting in a tight labor market and pressure on wage levels.

Labor is particularly scarce in the construction, manufacturing, retail and wholesale sectors, but the hunt for labor is happening throughout the economy. Adds Mr. Dunkelberg:

Owners’ plans to fill vacancies remain high, with a seasonally adjusted net 26 percent planning (hope) to add new jobs over the next three months, up 6 points from April and close to a 48-year record high.

Overall, 67 percent said they hired or tried in May, up 8 points from April. Sixty-one percent (92 percent of those hiring or trying) of owners said there were few or no qualified applicants for the positions they were trying to fill (up 6 points)… Apparently it’s getting harder and harder to occupy this position openings.

No wonder owners pay more to attract new employees and retain existing employees. The NFIB economist reports on the companies surveyed:

Seasonally adjusted, a net 49 percent said they would increase compensation, up 3 points from April, just one point below January’s 48-year record high. Net 25 percent plan to increase compensation over the next three months, down 2 points from April. These rising labor costs are being passed on to consumers via higher selling prices, which are increasing at a record pace.

It’s hard to see a silver lining in rising prices, but they could lure more US consumers into the workforce. “A few more good months of increased labor force participation could bring overall employment back to 2020 levels,” adds Mr. Dunkelberg.

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Mr. Freeman will host “WSJ at Large” this Friday at 7:30 p.m. EDT on Fox Business Network. The program will be repeated on Saturday and Sunday at 9:30 a.m. and 11:00 a.m. EDT.

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James Freeman is co-author of The Cost: Trump, China and American Revival.

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Alley Einstein

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