Workplace turmoil, labor shortages, inflation give small business owners a confidence crisis

RALEIGH – From tech giants like IBM and Cisco to healthcare providers, employers are struggling to hire—and retain—workers.

Small businesses, which drive much of America’s economy and create millions of jobs, are fighting to find talent, too. And the inability to recruit talent to fill open jobs is wearing on these owners’ enthusiasm, a new survey finds.

Making matters even more challenging for businesses is data that shows the “quits rate” for U.S. workers has hit an all-time high of 2.9%, and the results of another new survey that show some 26% or workers are likely or very likely to jump to a new job in the next six months.

Mix this with global supply chain problems, the continuing struggle with COVID and inflation concerns, and what’s left is a potentially toxic brew for small businesses, just as the holiday shopping season — the make-or-break time of the year for so many businesses — begins.

There’s less optimism to go around

New data from an National Federation of Independent Business (NFIB) economic index shows that small business owners are feeling less optimistic than they were a month ago.

The NFIB noted in its report that the change was slight, dropping by one point from 100.1 to 99.1 in anticipation of a “rocky” fourth quarter due to labor shortages, supply chain disruptions, inflation and uncertainty.

“Small business owners are doing their best to meet the needs of customers, but are unable to hire workers or receive the needed supplies and inventories,” said Bill Dunkelberg, the chief economist at the NFIB in a statement.

The report from the NFIB came as the United States Labor Department released August 2021 data from the Job Openings and Labor Turnover Survey (JOLTS) program, which tracks national data on job openings, hires and separations.

The preliminary data from the Labor Department showed that the job quits rate in August 2021 was 2.9%, which would be an all-time high in the data set, which tracks back to December 2000.

“Hires decreased to 6.3 million while total separations were little changed at 6.0 million. Within separations, the quits rate increased to a series high of 2.9 percent while the layoffs and discharges rate was little changed at 0.9 percent,” the statement from the United States Bureau of Labor Statistics reads.

Data from a survey from GWI that was released on Tuesday found that 26.1% of adults in the United States said they were likely or very likely to look for a new job or leave their current one during the next six months.  For those under 35 years old, 36% responded that they would look for a new job or leave their current one.  The study included 2,251 U.S. internet users at least 16 years old, and the survey authors note that 336 respondents reported they were under 35 years old, 483 reported they were millennials and 418 reported they were likely to leave their current job in the next 6 months. 39.6% of respondents reported they were unlikely or very unlikely to leave their jobs.

More workers are leaving their jobs for family-friendly work options

The number of available jobs also decreased from its 10-year high in July when there were more than 11 million open positions, according to the BLS data, to an estimated 10,439,000 job openings available on the last day of August. Still, a majority of the small businesses owners surveyed by the NFIB reported that they’ve been unable to hire for open positions.

A prior report from the NFIB found that 51% of small business owners had reported job openings that they could not fill, which was a record number, according to the statement issued by the organization.

Meanwhile, a net of 42% of small business owners reported raising compensation, one percentage point higher than August, and a 48-year high.

Furthermore, the NFIB survey revealed that a net 30% of small business owners are planning to increase compensation in the next three months, which is a 48-year high as well.

It’s not that people aren’t looking for work, as the labor force participation rate is still below its pre-pandemic level, said Dr. Anne York, professor of economics, at the Meredith College School of Business.

“The economic indicator that small businesses should watch is the labor force participation rate,” said York.  “This is percent of a population who is either working or actively looking for work.”

York’s rationale is that when someone is already working or looking for work, an employer may be able to recruit them because these are people that have shown they are willing to work.

Help wanted: Jobs sites report thousands of open positions across Triangle

Economists: concerns are valid

“Small businesses are correct to worry about labor availability and inflation,” said Dr. Michael Walden, an economist and a William Neal Reynolds Distinguished Professor Emeritus at North Carolina State University.  “Most businesses need workers to operate, and as we move past the COVID recession, small businesses are trying to ramp up production. The lack of qualified workers is inhibiting their expansion.”

28% of small business owners surveyed said that labor quality was the top business challenge they faced, and 12% of owners said that labor costs are the top challenge facing their business, both which were record highs in the history of the survey.

“With higher inflation and reduced labor availability as big problems in today’s economy, it is understandable that small businesses are worried, and this worry is reflected in their lower optimism,” said Walden.

The labor force participation rate in January 2020 for those in “prime working years,” or people aged 25-54, was 83%, York said.

“Once the pandemic started last year, a lot of workers were, of course, basically thrown out of the labor market when their employers had to shut down,” said York. “But now, a year and half later, we have not yet returned to the pre-pandemic labor force participation rates.”

For workers 55 and older, the labor force participation rate was 40.3% in January 2020 and is currently at 38.6%, said York.

Survey: Small business optimism at all-time high but consumer confidence drops

Are all sectors affected?

There is one sector of the economy that Walden noted “may be immune to some of these concerns.”

Technology.

That’s because, said Walden, “technology received a big boost from the pandemic as working and the delivery of both products and services migrated to tech processes.”

And, the technology sector continues to innovate and expand, said Walden, adding that the largest challenge in that sector would be finding workers in order to meet rising adoption and use.

“While the tech sector also has some challenges along the lines of availability of talent and, in some instances, supply chain issues—for high-tech or advanced manufacturing—for the most part the sector is doing well and its leaders are optimistic,” said Brooks Raiford, president and CEO of the North Carolina Technology Association (NC TECH).

Raiford cited the organization’s most recent polling of technology executives, released in June, which demonstrated what Raiford called “widespread optimism about hiring, business trends and growth.”

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“Virus remains in charge”

“I don’t think that the overall finding that the current economic situation is unsettled is a controversial one. Nor do I think that saying that businesses are struggling with challenges related to labor and supply chain bottlenecks are controversial,” said John Quinterno, a Duke University professor and the founder and principal of South by North Strategies Ltd., in an interview with WRAL TechWire. “What is striking, however, is the analysis’ complete silence as to what is driving the upheaval: an ongoing global pandemic.”

The global pandemic isn’t over, said Quinterno, though everyone may wish it were so.

“Yet for reasons that continue to baffle me, we’ve pretty much given up on any public health interventions other than vaccination and masking in some circumstances,” said Quinterno. “Ironically, much of the push for doing away with public health restrictions came from the business community, which argued that they were causing too much economic damage.”

Now, said Quinterno, with the restrictions by and large gone, the economic problems haven’t disappeared, which the NFIB survey data is capturing.

“That is because the virus remains in charge,” said Quinterno. “The country has pretty much given up on providing economic support to businesses and individuals upended by the crisis.

When federal aid to businesses and individuals expired, consumer spending power decreased and the potential for economic hardship increased, said Quinterno.

“For months, groups like NFIB said that once enhanced and extended unemployment insurance benefits lapsed, workers would return and labor market crunches would abate,” said Quinterno. “That hasn’t happened, again, because the problem wasn’t the benefits but rather the pandemic.”

‘Delta’ appears to be taking steam out of US jobs recovery

Some business owners were feeling more optimistic as recently as August, the results of a PNC survey of small business owners found. In that survey, analysts found that while consumer confidence had slipped, optimism of small business owners was at a 19-year high, in part because of increasing vaccinations against COVID-19.

At the time the results of the survey were released Gus Faucher, chief economist for PNC Bank, told WRAL TechWire that the number of small business owners reporting optimism about the future may increase as companies put in place vaccine mandates.

The NFIB index measured as high as 102.5 in June and began the year at 95.0 in January. The five-year high is 108.8, from August 2018, and the five-year low came in April 2020 with a rating of 90.9. The organization began issuing monthly surveys in 1986.

In September, the NFIB measure that tracks “uncertainty” increased by five points, to 74, while the percentage of small business owners expecting better conditions over the next six months decreased by five points and is now a net -33%, according to the results.

“The best way to promote economic recovery is to get the virus under control,” said Quinterno. “Until that happens, the real business challenges documented by the NFIB will continue unabated.”

Survey: 97% of NC execs optimistic; 81% plan to boost hiring; but 29% to reduce office space

 

Maria Flores

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