Negativity Lingers for Small Business Owners
It’s not a secret that for the past couple years, small business owners have been leaning pessimistic when it comes to confidence in the economic landscape. The same was true for January, when the NFIB Small Business Optimism Index decreased to 89.9 points. This is the 25th month in a row coming in below the index’s 50-year average of 98, and the lowest sentiment since May 2023. What’s the story behind this drop in confidence? Let’s take a deeper look.
Decreased Sales
It used to be the lingering threat of a recession that had small business owners on-edge—but now, it’s real sales. “The percentage of business owners who expected real sales to be lower was 16 points greater than those that expected them to be higher,” noted the NFIB’s website. That’s a 12-point drop from December, when business owners had historically positive expectations for real sales. Earnings also took a hit, coming in at net negative 30 percent (which is 5 points down from December 2023).
Hiring Woes
While consumer spending may be strong, small business owners are finding it hard to fill their open positions—this according to the NFIB’s monthly jobs report. Bill Dunkelberg, Chief Economist for the NFIB, noted that “Owners continue to raise compensation to retain and attract workers with the skills and willingness to do the job, but hiring remains a struggle in the tight labor market.” Generally speaking, 55 percent of small business owners noted they would be hiring in January; of those, 89 percent reported they had few—if any—qualified candidates to fill their open positions. A net 39 percent of respondents have raised compensation, which is the highest number since May 2023; 26 percent of small business owners have a plan to raise compensation in the next three months.
Inflation
While inflation is still sticking as one of the main concerns on business owners’ minds, those listing it as their top worry was down 3 percentage points from December. More business owners were also reporting lower pricing—hitting the highest levels since August 2020. As reported by Reuters, “Concerns around rates of interest and tightened credit conditions for small business borrowers have tracked with the Federal Reserve’s rate hike campaign, launched in 2022 in an effort to curb inflation. The Fed, though, has signaled rate hikes are over and it should be in position to lower rates later this year.”
Keep up with the ever-changing small business landscape by turning to the Financial Pantry, ARF Financial’s informative blog. We cover all aspects of small business ownership, team management, strategy implementation, and more. And when it’s time to consider a loan or line of credit, look no further than the world-class products offered by our team. Stop by today and learn how ARF Financial can help you reach your 2024 business goals.
Your privacy is important to us. ARF Financial will never sell or rent your information to any third party. Click here for more information about our privacy policy.