Small business confidence dropped again in June as fears over white-hot inflation persisted, with the most business owners since 1980 reporting that rising prices were their single most important problem, according to a new survey published on Tuesday.
The National Federation of Independent Businesses, a Tennessee-based association of small business owners, said its Small Business Optimism Index fell to 89.5 last month, the sixth straight month of readings below the 48-year average of 98.
The outlook is increasingly dark for many small businesses, with the percentage of owners expecting better business conditions over the next six months falling to the lowest level recorded in the 48-year-old survey. Expectations for better business conditions have deteriorated consecutively over the past six months.
The biggest problem, according to the survey, is inflation: 34% of small business owners reported that rising prices are their single most important problem in operating their business, the highest reading since 1980.
"As inflation continues to dominate business decisions, small business owners’ expectations for better business conditions have reached a new low," NFIB chief economist Bill Dunkelberg said in a statement. "On top of the immediate challenges facing small business owners including inflation and worker shortages, the outlook for economic policy is not encouraging either as policy talks have shifted to tax increases and more regulations."
Scorching hot inflation has forced the Federal Reserve to move at the most rapid pace in decades to raise interest rates in order to tame consumer demand, raising fears on Wall Street of a slowdown in growth or even a potential recession. Policymakers approved a 75-basis point rate hike in June, the first since 1994, and are expected to raise rates by another 75-basis points in July.
Businesses also struggled to onboard new employees, with half of owners reporting that they could not fill open jobs. The Labor Department reported last week that there were 11.3 million open jobs at the end of May. The number of available jobs has topped 10 million for eight consecutive months; before the pandemic began in February 2020, the highest on record was 7.7 million.
Of the small businesses trying to hire new workers, a stunning 94% reported that few or no qualified individuals applied for the position they were trying to fill.
The Fed is trying to cool the job market without causing unemployment to increase too much.
Faced with a worker shortage, small businesses have responded by raising wages: 48% of respondents said they increased pay in June, while 28% of owners plan to increase compensation in the next three months. In all, 8% of business owners have cited labor costs as the biggest problem facing their business, while 23% said it was labor quality.