Research conducted on small businesses revealed that price rises and pay increases are occurring in tandem across all economic sectors, as the workforce shortage continues into 2022.
A new survey by the National Federation of Independent Business (NFIB) shows that the net percentage of owners who raise selling prices has reached 61 percent. This is the highest level since 1974 when inflation was rampant. This 48-year record shows that a net 50% of owners are increasing compensation.
Holly Wade, executive director of NFIB Research Center, stated that “we haven’t seen anything similar in our survey since mid-1970s.” “This is a new environment for small-business owners — and it’s an amazing challenge for them.”
Alignable, an online platform that helps small businesses find workers, published a survey last week. Some sectors have higher numbers. Two-thirds of all restaurants and three quarters of manufacturers report that they are unable to find workers for open positions. A staggering 92 percent of senior and assisted living facilities also report difficulty finding employees.
Eric Groves, Alignable CEO and co-founder, said that “we’re definitely tracking ongoing problems on the hiring front.” “What we have seen is that they are increasing their salaries, and they are paying people more. But it’s not drawing back the volumes they need,” Eric Groves, Alignable co-founder and CEO.
Analysts were able to see some bright spots in NFIB data. Chief economist at Comerica Bank Bill Adams stated that, while labor is still scarce, evidence suggests that supply chains are starting to improve. More business owners report increasing inventory levels, and fewer report shortages.
He said that although small-business optimism declined a bit over the month, details from the survey revealed that some of those problems small businesses face are beginning to improve.
Adams stated that “the context here with NFIB survey was other data have also pointed at the supply chain logjam improving during the turn of the Year.” Adams cited a drop in reported delivery delay and an increase in inventory in the fourth quarter 2021.
However, this might not be enough to slow inflation. Adams stated that although there will be fewer shortages in parts and components, continued wage gains and higher energy and housing prices will continue to drive inflation towards the Federal Reserve’s 2 per cent target for the year.
He stated that while we call for four rate increases over the course 2022, risks favor a quicker rate of tightening.
Analysts believe the Fed will need to be even more hawkish in order to reduce inflation. CNBC reported that Ethan Harris, the head of global economics research at Bank of America, forecast seven rate increases for 2022, and four more next. Harris is not an anomaly. The CME FedWatch Tool estimates that there will be seven rate hikes before the Fed’s last meeting in 2022, at 16 percent. There is a 4 percent chance that the Fed funds rates will rise to 2 percent.
Harris mentioned rapidly rising wages as evidence that policymakers need to act more forcefully. The January monthly jobs report revealed that the average hourly wage rose by 5.7 percent over the previous year.
Inflation will continue to be a major economic headwind as long as there is worker shortage.
Harry Holzer, a Georgetown University professor of public policy, said that if we can reduce inflation and allow some wage increases to survive, then that will be good news for workers. He said that it was a challenge because wage increases are one factor in the rising sticker prices.
Holzer stated that it gives small businesses a feeling that these issues are still relevant. Holzer noted that mom-and-pop businesses have less resources than big companies to protect them from potential challenges.
Wade stated that it is a battle her family members are learning to win as they go.
“The pandemic has caused a shift in the problem-solving process. Wade stated that the pandemic happened quickly and small-business owners had to adapt quickly. It’s a difficult situation for many.
