Looking across the range of issues surveyed by the NFIB, labor and inflation remain front and center of what most concerns small businesses. As shown below, the combined percentage of respondents reporting either cost or quality of labor as their most important problem continues to be the most prevalent topic with 33% of firms reporting as such. That is down slightly from 34% in January thanks to the decline in quality of labor. Most other categories fell to or remained at record lows. Such was the case for Poor Sales, Competition from Big Business, Government Requirements and Red Tape, and Financial & Interest Rates.
Last month the percentage of respondents reporting inflation as their biggest problem went unchanged from the December reading of 22%. This month that reading gained another 4 percentage points to cross above a quarter of all respondents for the first time on record going back to 1986. Behind labor concerns (the combined reading of cost and quality of labor), this is the most commonly reported problem, and based on the action in commodities prices over the last couple of weeks, this reading will almost certainly increase again next month.
That means what has usually been the second most important problem on a combined basis recently, government requirement and taxes, dropped in the ranking. In fact, the 3 percentage point decline in government requirements offset the one percentage point increase in taxes to tie the November 2005 reading for the lowest on record. As we have noted in the past, the past few presidential cycles have structurally seen lower readings in these indices when Republicans were in office and vice versa when Democrats have held the presidency. With Biden currently in office, the record low reading is somewhat unusual from this political perspective.
That is not the only category that has fallen to record lows. Poor sales and competition from big business have both fallen dramatically in the past couple of years. Click here to view Bespoke’s premium membership options.