Benjamin Hughes

April 19, 2024 - 15:00 pm

Decline in U.S. Small Business Hiring Plans

According to the latest jobs report from the National Federation of Independent Business (NFIB), hiring intentions among U.S. small businesses dropped to their lowest level since the early stages of the COVID pandemic, despite ongoing tightness in the labor market.

Specific Findings of the NFIB Report

In March, the NFIB's survey revealed that only 11% of small businesses planned to create new jobs in the next three months, marking a one-point decrease from February and hitting the lowest level since May 2020. This decline brings the hiring index below its historical average of 11.8%, indicating a departure from typical job creation patterns in a strong growth economy.

Continued Employment Activity

Although the overall job creation outlook decreased, more than half (56%) of small business owners reported actively hiring or attempting to hire in March, which remained unchanged from February. The NFIB noted that while employment activity remains solid, it is tapering off from peak levels observed earlier.

Competitive Labor Market and Compensation Trends

NFIB Chief Economist Bill Dunkelberg highlighted the competitiveness of the labor market, indicating that job openings in small businesses are now comparable to pre-pandemic levels. This tight market led a net 38% of small businesses to report raising compensation in March, a three-percentage-point increase from February.

Skill-Based Job Openings by Industry

Among small businesses, 31% have job openings for skilled workers, while 14% have openings for unskilled labor. In specific industries, transportation topped the list with 77% of small businesses reporting job openings, up significantly from a year ago. Services and construction followed closely, each with 44% of small businesses reporting job openings.

Challenges in Filling Job Openings

Despite active hiring, small businesses face challenges in filling positions, with nearly half in the construction sector reporting unfilled job openings. Among businesses attempting to hire, 86% reported encountering few or no qualified job applicants.

Contextualizing the NFIB Report

This report from the NFIB coincides with other employment data releases, such as the ADP National Employment Report, which showed higher-than-expected hiring in March. These reports are closely watched by policymakers at the Federal Reserve, providing insights into the labor market's dynamics as they assess potential interest rate adjustments this year.