NFIB Small Business Optimism gained just 0.5 points in December to remain at a relatively depressed reading of 98.9. Inflation and labor disruptions have continued to put a damper on the outlook of small business owners, despite an improvement in both earnings and sales. A record 22% of small businesses said that inflation was their single most important problem, yet quality of labor continued to top the list of most important problems with 25% of responses.
A shortage of qualified labor has placed continual upward pressure on wages, and as a result a record 48% of firms raised wages over the past three months (bottom graph). This reflects the tightness of today’s labor market and the growing possibility of an entrenched wage-price inflation spiral – both of which are keeping the Fed on course to tighten monetary policy.
