Today's NFIB Small Business Optimism Index for July is further evidence that unfilled jobs is impacting business conditions. The small business survey noted that 49% of respondents have open positions that they are unable to fill, a record high for this indicator. In addition to open positions, the fallout from supply chain disruptions is an additional headwind for businesses as well. The labor and supply chain issues are contributing to the decline in the Optimism Index itself, falling 2.8 points to 99.7.

A couple of highlights from the report that points to higher prices ahead:

• The percent of owners reporting inventory increases declined seven points to a net negative 6%.
• A net 12% of owners view current inventory stocks as “too low” in July, up one point from June and a 48-year record high reading.
• A net 6% of owners plan inventory investment in the coming months, down five points from June and also a historically high reading.

This situation with inventory and the supply chain is leading to a near record 46% of reporting businesses indicating they are increasing prices versus decreasing them. This month's reading around prices is down only one percentage point from the June reading.

In summary, and in light of the recent Job Openings and Labor Turnover Survey (JOLTS), businesses are less optimistic in the coming months. As noted in the report, six of the ten components that comprise the broader index declined in July. Several of these categories are worth keeping a close eye on, like a weaker view on the economy, sales and earnings trends. Much of this dimmer view on business is centered around a lack of workers to produce product as well as higher prices for raw materials and higher labor cost. With government pandemic support programs abating in September, maybe unemployed individuals will find their way into the labor force.