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Labor shortage continues to be a challenge for small businesses

According to NFIB’s monthly jobs report, the labor shortage continues to be a challenge for small businesses with 51% (seasonally adjusted) of owners reporting job openings they could not fill in the current period, up four points from April and matching the 48-year record high set in September. Twenty-three percent of owners reported labor quality was their top business problem, second to inflation. Twelve percent of owners cited labor costs as their top business problem.

“The labor force participation rate is slowly rising but small businesses continue to have a hard time filling their open positions,” said NFIB Chief Economist Bill Dunkelberg. “The number of job openings continues to exceed the number of unemployed workers which has produced a tight labor market and added pressure on wage levels.”

Overall, 67% of owners reported hiring or trying to hire in May, up eight points from April. Ninety-two percent of those owners hiring or trying to hire reported few or no qualified applicants for the positions they were trying to fill. Thirty-three percent of owners reported few qualified applicants for their open positions and 28% reported none.

Seasonally adjusted, a net 49% of owners reported raising compensation, up three points from April and one point below the 48-year record high set in January. A net 25% of owners plan to raise compensation in the next three months.

Forty-two percent of owners have openings for skilled workers and 25% have openings for unskilled labor. Sixty-five percent of the job openings in construction are for skilled workers, up 11 points. Sixty-nine percent of construction firms reported few or no qualified applicants, up five points, clearly one of the tightest domestic labor markets in recent history.

A seasonally adjusted net 26% of owners are planning to create new jobs in the next three months, up six points from April and close to a 48-year record high. Hopefully, they will succeed and help close the gap between current employment and the 2020 previous high level.