Inflation and labor market challenges plague small business owners, dragging down sentiment. In August, NFIB's Small Business Optimism Index dropped 0.6 points to 91.3%, the first decline in four months and the 20th straight month below its 49-year average of 98%.

Inflation and Higher Prices

About 23% of small business owners said inflation was their top problem, two points more than last month. That means they have 💖been forced to pass on some of those costs to their customers by raisi🏅ng prices.

The net percent of owners raising average selling prices increased 2 points from July to a net 27%, seasonally adjusted.  Among the most frequent price increases were those in finance (52% higher, 7% lower), construction (51% higher, 6% lower), retail (45% higher, 11% lower), and wholesale (36% higher, 20% lower).

“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,” said NFIB Chief Economist Bill Dunkelberg. “Inflation and the worker shortage continue to be the biggest obstacles for Main Street."

Labor Market Still Challenging

The number of owners reportiꦐng job openings they cannot fill has fallen by two points to 40% since July. The construction, services, and manufacturing sectors have the most difficulty filling open positions, while the transportation and finance sectors have the lowest number of openings. 

In August, 59% of owners reported hiring or trying to hire, down two points from July, and 54% (92% of those hiring or trying to hire) reported finding few or no qualified applicants (also down two points). The percentage of owners reporting few qualified applicants is unchanged at 33%. With 24% of respondents identifying labor quality as a major business problem, it is the most frequently identified issue.