Small Business Confidence Drops to 11-Month Low

A new report conducted by the National Federation of Independent Business reveals that small business confidence fell to an 11-month low, with the Small Business Optimism Index dropping by about 1.8 points to 97.1 in January. This is the lowest recorded reading since February 2021. This new low sentiment comes as worker shortages continue to heavily impact small businesses. Higher prices for goods and materials, consistent supply chain issues, and other factors also likely contributed to this new low reading.

According to the survey, a low amount of workers and a surge in prices for materials, as well as labor, remain major areas of worry for many small businesses. Many small businesses are also struggling to find workers to hire, something that has affected businesses small and large during the COVID-19 pandemic. As a result, about 27% of small businesses plan to raise wages in the next three months, according to the survey. While this is down about five points from what was recorded in December, this rate still remains at a historic high. 

The survey also records that small businesses have already raised compensation. In fact, according to the survey conducted this month, the amount of small businesses that have already raised wages is the highest its ever been in 48 years.

This news comes amid a consistent labor shortage in the United States because of the pandemic. However, there are many signs that more workers are slowly returning to the workforce, which is a positive sign. But many businesses are still struggling to find qualified workers, even with more people returning to the workforce. At the end of December, there were 10.9 million job openings. So, even with hiring increasing with each past month, many employers are still struggling to find workers.

The supply chain also continues to impact small and large businesses. According to this survey, small businesses are still struggling to overcome these supply issues, and it’s become increasingly hard for goods to travel from warehouses or factories to consumers. While large corporations have been able to spend money and ensure that they solve these issues for their own business pursuits, many small businesses haven’t been able to spend this time of money, and have suffered as a result. 

It does appear that labor issues and consistent supply chain problems are the reason for small business confidence to drop to a new 11-month low. Inflation and raising the prices of goods have also impacted small businesses and how they successfully conduct business. When it comes to labor, however, there may be signs that the labor shortage will slowly come to an end this year, especially if the trend of monthly hires continues in the way that it has.

Of course, the ongoing pandemic may continue to be a problem for small businesses, especially when it comes to disrupting the supply chain. If small businesses are able to find qualified workers, though, these many issues may cease to be a huge problem — and confidence may again rise.