Despite the resilient labor market conditions, small businesses are scaling back their plans for wage increases and hiring. Only 19% of small firms expressed an intention to boost pay in February, a significant drop of 7 percentage points from January and the lowest share since March 2021, according to the National Federation of Independent Business (NFIB).
The moderation in wage growth is accompanied by a slowdown in hiring plans. A net 12% of small businesses indicated they expect to hire in the next three months, the lowest since the onset of the pandemic.
While small businesses are tightening their belts on pay and hiring, the overall labor market remains robust. However, the divergence between small firms and the broader economy highlights the challenges faced by these enterprises in attracting and retaining talent in a competitive job market.
Bill Dunkelberg, the NFIB's chief economist, acknowledged the slowdown but emphasized that labor demand remains strong among small businesses. This sentiment is echoed by data showing that nationwide job openings ticked down but remained elevated in January, indicating that the labor market is still relatively tight although it is beginning to loosen in a sign of tighter times ahead for SMBs and workers alike.
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