In an earlier post, we discussed the latest small business survey from the NFIB. Another aspect of the survey is to question businesses on what is currently their most important problem.  As shown in the table below, by far the most common response is either cost or quality of labor accounting for a combined 32% of responses. That is despite the apparent slowdown in labor markets as we discussed in today's Morning Lineup. Another 22% of responses point to government-related concerns like taxes (13%) and government red tape (9%). Combined, that is tied with inflation for the second most pressing issue among small businesses.

While it makes up a vastly smaller share of responses at only 5%, financial & interest rates have seen their share rise significantly.  At 5%, it is the highest reading since 2010.

Furthermore, of firms reporting a negative outlook for expansion, rates rank as the second most common reason for said outlook behind political climate. While political climate holds a higher share of responses, it is worth noting that the reading has historically held a strong correlation with which party is in office (tending to favor Republicans). As shown below, after the 2016 election when Trump was elected to office, the readings tanked whereas leading up to and in the wake of the 2020 election of President Biden the reading rose sharply. Since then it has moderated, but it still remains the main reason cited by small businesses for their negative outlook.

Finally, we would note that although the October report saw a massive drop off in actual sales, few businesses appear to be overwhelmingly concerned with the issue. Only 5% of responses credited poor sales as their biggest problem. That is unchanged for five months in a row as it was higher as recently as the summer of 2021.
 

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