The May fell short of lofty expectations, adding fewer jobs than economists expected and underscoring the challenges the U.S. economy faces in trying to reboot the workforce after COVID-19 lockdowns.
Small businesses are no exception.
by the National Federation of Independent Business (NFIB) found that a record-high 48% of small business owners in May had unfilled job openings. Additionally, 34% of owners reported having to hike pay the highest reading in the past 12 months, and 22% more expect to do so in the near future.
“Small business owners are struggling at record levels trying to get workers back in open positions,” NFIB Chief Economist Bill Dunkelberg said in a statement.
“Owners are offering higher wages to try to remedy the labor shortage problem. Ultimately, higher labor costs are being passed on to customers in higher selling prices,” he added.
The NFIB’s data underscore how companies big and small are — a dynamic that’s been battering industries across the economy, which is entering a new phase of strong growth after lockdowns.
As a result, many have had to to the workforce, and leave behind generous supplemental unemployment benefits that have been faulted for creating labor shortages.
According to the NFIB, small business owners are also struggling to find “qualified” employees for the positions they are trying to fill — suggesting the problem isn’t just quantity but quality. Some 32% of owners reported few qualified applicants for their positions and 25% reported none, according to the report.
Having to boost prices ‘a lot’
Still, employers have cited a labor shortage as a critical factor behind why more jobs are not being created — even as the post-COVID rebound picks up speed. At least at the margins, an additional factor cited by some economists .
“We know that about one in four workers is taking home more money on unemployment than they earned working,” Neil Bradley, U.S. Chamber of Commerce Executive Vice President told Yahoo! Finance Live this week.
In particular, hiring for hotels, restaurants, and other leisure businesses has only just started to turn around. The May jobs data showed a boost to employment and compensation in those sectors, as businesses hike pay rebuild lost staff.
Yet it is still unclear if the increase in money will be enough to close the employment gap in sectors hit hardest by the pandemic.
“It’s important to remember that before the pandemic we had a worker shortage,” said Bradley. “Today, as we exit the pandemic, the pandemic has exacerbated some of the underlying causes.”
Moreover, the costs of higher wages are more than likely to be passed along to consumers in the form of higher prices, exacerbating the sharp rise in prices seen across a range of goods and services in the last several months.
“I have [had] to increase my prices a lot,” said Dale Jackson, owner of Jackson Services Co., a plumbing and electrical company in Georgia. “We’re talking like 25 to 40% because I have to make up the difference in my overhead.”
Meanwhile the skills gap has forced business owners like Jackson to think more creatively about how to attract qualified talent. Recently, Jackson started a new incentive: Paying a referral bonus to help incentivize leads.
“If you know someone that is in our industry…and you can convince them to come interview for me and I hire them, I will pay you $200 a month [for] every single month they work for me,” he added.