The Small Businesses Optimism Index decreased in February to 89.4, marking the 26th consecutive month below the 50-year average of 98, according to a recent survey by the National Federation of Independent Businesses’ Research Center.
In a survey conducted in February, 23% of owners reported inflation as their most important concern in running their business, surpassing labor quality as the top problem.
“While inflation pressures have eased since peaking in 2021, small business owners are still managing the elevated costs of higher prices and interest rates,” NFIB Chief Economist Bill Dunkelberg said in a written statement. “The labor market has also eased slightly as small business owners are having an easier time attracting and retaining employees.”
According to NFIB’s monthly jobs report, 56% of owners reported actively hiring or attempting to do so in February. Twenty-five percent of owners found few qualified applicants for their open positions, while 26% reported none.
Eleven percent cited labor costs as their primary business concern, marking an increase from January and coming within two points below the highest reading of 13% reached in December 2021. Additionally, 16% said that labor quality was their top business problem, the lowest reading recorded since April 2020.
The Alabama Department of Labor this week reported a slight uptick in the unemployment rate and a labor participation rate of 57.4%.
State-specific inflation numbers are not available, but NFIB State Director Rosemary Elebash said members in Alabama are frustrated.
“COVID brought the economy to a standstill four years ago this month, and we still haven’t fully recovered,” Elebash said. “Inflation is still driving up the cost of running a small business and affecting peoples’ buying power.”
The frequency of reports indicating positive profit trends was a net negative 31% (seasonally adjusted), a very poor reading, according to NFIB. Among those owners reporting lower profits, 29% attributed it to weaker sales, 15% to the rise in material costs, 13% cited usual seasonal change, and 11% to price adjustments. For those reporting higher profits, 42% credited sales volumes, 29% cited usual seasonal change, and 14% cited higher selling prices.
A seasonally adjusted 19% plan to raise compensation in the next three months, down seven points from January and the lowest since March 2021.