Labor Quality Continues to Hold Back Small Business Hiring

National Federation of Independent Business (04/06/23)

Small business owners reporting labor quality as their top small business operating problem remains elevated at 23%, according to the National Federation of Independent Business. Labor costs reported as the single most important problem decreased one point to 11%, just two points below the highest reading of 13% reached in December 2021. The labor force participation rate remains below pre-Covid-19 levels, which is contributing to the shortage of workers available to fill open jobs. Forty-three percent (seasonally adjusted) of all owners reported job openings they could not fill in the current period, down four points from February. Thirty-four percent of owners have openings for skilled workers and 19% have openings for unskilled labor.

Small business owners’ plans to fill open jobs continued to ease, with a seasonally adjusted net 15% planning to create new jobs in the next three months, down two points from February and well below the recent peak of 23% reached last September. While large businesses shed workers, small business owners have reported some hiring success in the last four months, with more firms reporting increased employment than reductions. Overall, 59% reported hiring or trying to hire in March, down one point from last month. Of those hiring or trying to hire, 90% of owners reported few or no qualified applicants for the jobs they were trying to fill. Twenty-six percent of owners reported few qualified applicants for their open jobs and 27% reported none. Seasonally adjusted, a net 42% of owners reported raising compensation, down four points from February. A net 22% plan to raise compensation in the next three months.

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