In an earlier post, we discussed the latest NFIB survey of small businesses. While optimism was weak, a particular area of concern was employment. What businesses reported to be their most important problems reiterated this. As shown below, of all the problems highlighted, labor took a backseat in February with a five percentage point decline in the share of businesses reporting quality of labor as their biggest problem.

When combining with the share reporting cost of labor to be their biggest problem, 27% of businesses reported these labor concerns as their most pressing. As shown below, that combined reading ties June and December 2020 for the lowest since May 2020.

As for what picked up the difference, the percentage of respondents reporting inflation as their biggest problem jumped back up to 23% versus the fresh low of 20% last month. At that level, inflation is once again the single most important issue among small businesses. That increase is also a bit contrary to the report's index on higher prices which fell to fresh lows in February.

While the increase in February in the share reporting inflation as their biggest problem doesn't exactly disrupt what has been an overall trend lower in inflation readings, one more pressing increase has been for poor sales. As inflation jumped to the forefront in the past few years, the share of businesses reporting poor sales as their biggest problem fell to historically low levels. While it is still low, the past year has seen a steady climb back up to 7%.

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