Labor shortage isn’t Main Street’s biggest problem

The Delta variant hasn’t significantly changed the outlook for small businesses in America, but the conditions under which the Main Street economy operates as it attempts to fully reopen are weighing on business owners across the country.

According to Q3 2021 CNBC | Momentive Small Business Survey. Almost a third (31%) say they have vacancies that they have not been able to fill for at least three months, compared to 24% in the last quarter and 16% in the first quarter of 2020.

According to the new CNBC | Momentive Survey, which was conducted between July 26 and August 3 among more than 2,000 small businesses in the United States

“It turns out that reviving the economy after months of shutdowns, layoffs and working from home is really disorienting,” said Laura Wronski, head of scientific research at Momentive. “Unfortunately, there is no on / off switch, and these labor and supply shocks that we are seeing are totally expected on our way back to normal, even if they are disruptive. short term.”

The national unemployment rate is heading in the right direction, and the latest employment report from last Friday showed the strength of the pickup in hiring. But job vacancies have jumped to more than 10 million, according to the Labor Department, the highest level on record, and it has been hinted that there are more than a million more jobs available. than the people looking for them.

“This hyper-growth in the hiring rate means workers have the bargaining power to demand better wages before returning to work, or to quit their current jobs for better-paying opportunities. It’s especially difficult for small businesses. companies, which probably don’t have the same resources as their bigger competitors, ”Wronski said.

According to the survey, only a minority (24%) of small businesses plan to increase their workforce in the next year, and in the past two to three months, only 16% of small businesses report increasing their workforce.

Jill Bommarito, founder and CEO of Detroit-based Ethel’s Baking Company, which supplies national companies such as Whole Foods, UNFI and Dawn Foods, faces these pressures, especially as domestic companies increase wages to 15 $ and more, and add perks like paying for college education.

“In small businesses there are other ways to offer growth opportunities and a faster path to growth and promotion, but it’s hard to satisfy everyone with the wages,” said Bommarito, member. of Goldman Sachs 10,000 Small Businesses Voices. coalition, which found similar business concerns in its recent investigative work. “We had to raise everyone’s salaries twice this year, and we were seen as a leader.”

Workers profit from the tilt of the balance of power in the labor economy.

“We get people signing up for interviews and canceling or saying they have 14 interviews, or say ‘I have three opportunities, can we talk about hourly wages before I even come to see you?'”

The CNBC Q3 | Momentive survey finds 32% of small business owners say they raised wages in the past three months to attract workers, while 27% offered more flexible hours and 24% more on-the-job training . Fewer offered additional benefits, including improved medical benefits (8%), education benefits (7%), and childcare or elderly care benefits (5%).

Ethel’s Baking Company added long-term and short-term disability, dental and vision care, and $ 2,000 in education, but it can’t afford college education for workers like Target or Walmart recently. announced that they were doing so. “We can’t offer a college education. Everything is increasing for us in all areas, our raw materials, our packaging, our cases, logistics, wages, benefits, all of that, and it hasn’t been the Typical 1% to 2%, but 18%, ”Bommarito said.

As the labor shortage is a big problem for small businesses, CNBC | The survey results show that this is not even as extreme as the supply shortage and corresponding supply chain disruption that small businesses have yet to overcome.

Four in ten small business owners say they are currently seeing their employees’ wages increase, but seven in ten are experiencing an increase in the cost of supplies.

“The worst part is that many small business owners are affected by all of these factors at once,” Wronski said.

She noted that 86% of those who say they experience an increase in labor costs also say they experience an increase in the costs of supplies.

“Unlike their bigger competitors, small businesses won’t be able to absorb these costs for very long. If they haven’t already, they will end up raising their prices to keep going,” Wronski said.

The survey finds that more companies (39%) have raised their prices than those that have raised their wages (33%), and many more (38%) say they could increase their prices in the future if cost pressures persist.

Ethel’s income grew a lot, but with the loss of profitability due to rising wages and benefits and rising input prices, Bommarito said it was “inevitable” that more small businesses like his are increasing their prices.

Tough operating conditions have not, however, resulted in a significant drop in small business confidence. The Q3 2021 CNBC | The Momentive Small Business survey reveals that general sentiment among businesses on Main Street is unchanged from the second quarter of 2021, although the Delta variant has become of greater concern to the economy.

Homeowners describing business conditions as good (36%) were up from the previous quarter (34%), while those describing business conditions as bad fell one percentage point to 17%. The percentage of small businesses that expect revenue to increase over the next 12 months (45%) and those that expect revenue to stay the same (34%) was unchanged from the second quarter 2021.

A majority of companies (66%) say they can continue to operate for more than a year under current conditions, according to the survey.

The delta variant could further change Main Street’s confidence, especially if consumers pull back. CNBC | The Momentive survey at this point reveals that only 21% of other small business owners surveyed for the study say the delta variant has “changed their outlook a lot” for the remainder of 2021. But 41% say it does. changed their outlook “a bit”.

The response of small business owners to the delta variant question was similar, with 19% saying it had “changed their outlook a lot” and 37% saying it had changed their outlook “a bit”.