U.S. small-business optimism index remains low

‘The labor supply is not responding strongly to small businesses’ high wage offers and the impact of inflation has significantly disrupted business operations.’

A gauge of U.S. small-business sentiment held steady last month at the lowest level since April 2020, with firms remaining concerned about inflation and the economy’s prospects.

The National Federation of Independent Business optimism index stood at 93.2 in April, the group said last week. The net share of owners expecting better business conditions in the next six months eased one point to a record low.

Some 32% of respondents said inflation is still their biggest operating challenge, up slightly from March and the highest since the fourth quarter of 1980. That share has risen in six of the past seven months, NFIB data show. Monthly surveys began in 1986.

Labor quality was the second-biggest problem and planned compensation changes are still elevated. Government data showed consumer prices rose at a slower pace in April but remain near the highest in 40 years.

“Small business owners are struggling to deal with inflation pressures,” said Bill Dunkelberg,

Bill Dunkelberg economist

NFIB chief economist. “The labor supply is not responding strongly to small businesses’ high wage offers and the impact of inflation has significantly disrupted business operations.”

Small businesses have had difficulty filling a record number of vacancies and don’t always have the same resources as large firms to attract new talent. While large businesses posted solid hiring gains in April, those with less than 50 employees saw a 120,000 drop in payrolls, the worst in two years, ADP Research Institute data showed last week.

Five of the 10 components that make up the small-business sentiment gauge fell in April.