Small Business Hiring Increases in August

A great U.S. job market for workers at small firms got a little better in August. That’s according to the latest monthly employment survey from the National Federation of Independent Business, due out later today.

“Job creation picked up in August, with an average addition of 0.19 workers per firm compared to 0.12 in July,“ reports NFIB Chief Economist William Dunkelberg. He adds: “If any of the widely discussed ‘slowdown’ occurs, a significant contributor will be the unavailability of labor.” Given that small businesses are still trying to hire more workers, Mr. Dunkelberg says it’s “hard to call it a ‘recession’ when job openings still exceed job searchers.”

NFIB’s top economist elaborates on the historically tight labor market, the responses of business owners participating in the survey, and the changes recorded since July:

Sixty-four percent reported hiring or trying to hire (up 1 point), but 57 percent (89 percent of those hiring or trying to hire) reported few or no “qualified” applicants for the positions they were trying to fill. A record 27 percent of all owners cited the difficulty of finding qualified workers as their Single Most Important Business Problem, a clear indication that a shortage of qualified workers is slowing growth. Forty-two percent of construction firms cited the labor shortage as their top business problem.

Being qualified can involve technical skills related to a particular job but also soft skills which allow applicants to become reliable and professional members of a team. And construction isn’t the only place where firms are looking for new teammates. Manufacturing is another sector where the labor market remains especially tight.

Amid the ongoing American worker shortage, the NFIB report also finds that business owners are not giving up the search for new talent. “A seasonally-adjusted net 20 percent plan to create new jobs, down 1 point and historically strong,” says Mr. Dunkelberg. He shares more data on the impact of the heavy hiring appetite among employers:

The continuing labor shortage keeps pressure on compensation. Raising compensation along with increased training for hires who don’t have all the desired skills and experience is the only way owners have to deal with the shortage. Twenty-nine percent reported raising compensation and 19 percent plan to do so in the coming months.

Friday’s government jobs report will provide a snapshot of the broader economy. The news today on small business hiring is that recession is still nowhere in sight.

Yet Mr. Dunkelberg warns that by trying to help the economy, monetary policy makers could end up making it worse:

The Federal Reserve is cutting interest rates to stimulate spending and create inflation, but demand is so strong that firms cannot hire enough workers to satisfy it.