Employment at small U.S. firms fell last month for the first time this year. That’s according to the latest jobs report from the National Federation of Free Trade Associations, which will be released later today. But it’s not because small companies don’t want to hire – they still can’t find and keep enough workers.
The NFIB reports that employment at small businesses fell by an average of 0.14 workers per firm in July. This follows a strong gain of 0.27 workers per firm in June. And the reverse situation is not because the owners have lost their desire to hire. In today’s strange labor markets, fewer people work at the firms participating in the survey, despite the historically large demand for labor at these same firms. According to William Dunkelberg, NIB’s chief economist:
49 percent (seasonally adjusted) of all owners reported they could not fill job vacancies, down 1 point from June and down 2 points from May’s 48-year high (in September). The number of unfilled job vacancies is more than 23 percent higher than the 48-year historical average. Nationally, the number of job openings continues to exceed the number of unemployed workers (job seekers), a tight labor market and pressure on wages. And, the labor force participation rate is still below its February 2020 level of 1.2 percentage points. The job market continues to be a challenge for small business owners. This is somewhat surprising as owners are quite pessimistic about the future of the business. [the 48-year history] The survey, but they still need “employees” for the future business.
The industries where most firms report job openings are transportation, construction, and manufacturing. But finding workers anywhere is difficult. Mr. Dunkelberg added:
30 percent of owners reported their vacancies (down 3 points) and 27 percent reported no reports (unchanged and just 2 points away from a 48-year record high). Hiring has never been harder!
Naturally, small businesses continue to raise wages to attract and retain smaller workers. According to the NFIB:
It reported seasonally adjusted, net compensation growth of 48 percent, unchanged from June and just two points below the 48-year record high set in January. Plans to collect a net 25 percent compensation over the next three months fell 3 points from June. These rising labor costs are passed on to consumers in the form of higher selling prices.
Let’s hope that US workers start seeing wage increases as fast or faster than the cost of the goods and services they buy.
James Freeman is the co-author of “The Price: Trump, China, and the American Renaissance.”
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