Small business owners are optimistic, according to both the November and December monthly surveys of small businesses by the National Federation of Independent Business (NFIB). However, one possible damper to growth is a critical shortage of qualified workers, reports the December survey.
Expect a Labor Shortage
Of the business owners surveyed, 54% reported having few or no qualified applicants for open positions. That’s a record high and up 10% from November. Plus, 31% of owners reported not filling open jobs. For 19% of owners, lack of suitable job applicants was the most pressing business problem. The two industries most affected were construction and manufacturing.
December job openings remained steady, but business owners with hiring plans decreased by 4%. The NFIB Jobs Report speculated the small decline could indicate increasing owner frustration about finding qualified workers.
One effect of the labor shortage is increasing wages. The Jobs Report found that the number of small business owners who planned to increase employee compensation was the second highest in survey history. Although the labor shortage is a problem for small businesses and can increase their costs, it indicates a growing economy.
Other NFIB Survey Takeaways
Here are some additional highlights of the December NFIB survey:
Capital spending: Owners reporting capital outlays increased 2% to 61%. The NFIB noted that this change anticipates a significant increase in capital spending. New equipment was acquired by 43% of owners, while 23% bought vehicles, 16% improved or expanded facilities, 6% procured new buildings or land for expansion, and 15% purchased new fixtures and furniture.
Credit: Only 3% of owners said all their borrowing needs weren’t met, a historically low percentage, while 32% of owners received the credit they needed. The average interest rate for short maturity loans increased 40 basis points to 6.1% after the Federal Reserve raised rates.
Inflation: The percentage of owners who reported increasing average selling prices decreased by 2%. The decrease ended a steady, though modest, uptrend in reported price increases.
Sales and inventories: A net 9% of owners said they had nominal sales for the past three months that were higher than the prior three-month period. That’s a 14% increase from November. “Strong sales resulted in a drawdown in inventories, setting the stage for additional inventory investment in 2018,” stated the NFIB.
The NFIB believes changes in tax laws and government regulations bode well for small businesses. Time will tell.