Small businesses in August were increasingly pessimistic about the economy as companies struggle with a tight job market and rising inflation, according to a survey from the National Federation of Independent Business (NFIB) released Tuesday.
Small business owners in total expressed a 37% net negative view of the economy, which is 7% lower than in July but higher than the 61% net negative view seen in June, according to a release from the NFIB. The single biggest concern for businesses was inflation, which was listed as the top concern for 23% of respondents, up 2% from the previous month, with 27% of business owners raising prices to counter inflation, a figure up 2% from July.
“With small business owners’ views about future sales growth and business conditions discouraging, owners want to hire and make money now from strong consumer spending,” Bill Dunkelberg, NFIB chief economist, said in the release. “Inflation and the worker shortage continue to be the biggest obstacles for Main Street.”
The Small Business Optimism Index fell 0.6 of a point in August to 91.3 points, below the 49-year average of 98 points, marking the 20th consecutive month below the average, according to the NFIB. Of small business owners, 40% reported that they had trouble filling openings on new jobs, which is down 2% from July but still remains high compared to historical trends.
Small business optimism fell again in Aug; 20th consecutive month below long-run average; expectations deteriorated further, at recession levels; businesses reporting higher nominal sales hit lowest level in 3 years; hiring plans below pre-pandemic levels; nothing good here: pic.twitter.com/ityqIOom6D
— E.J. Antoni, Ph.D. (@RealEJAntoni) September 12, 2023
Inflation rose in July to 3.2% from 3.0% in June, after steadily coming down from 9.1% in June 2021. The Federal Reserve, in an attempt to calm inflation, has raised the federal funds rate to a range of 5.25% and 5.50% through a series of 11 rate hikes that started in March 2022.
The jobs market showed softening in August, with the month only adding 187,000 nonfarm payroll jobs and the unemployment rate jumping to 3.8% as more people enter the workforce. The announcement included numerous revisions from earlier jobs reports, indicating the market is not as strong as previously indicated, with June being revised down by 80,000 jobs and July being revised down by 30,000 jobs.
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