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The labor market is still very tight, with more than 11 million jobs, but only 6 million unemployed. A sample of the NFIB’s 300,000 member firms reports jobs at record levels for 48 years, with 51% reporting jobs that are difficult to fill. Workforce growth is reported by a record high percentage of owners trying to fill recruitment jobs and retain the workers they have. Smoking cessation rates are historically high as workers see opportunities to improve their situation.

For most small businesses, labor costs are their biggest operating expense. The percentage of owners reporting higher compensation to their employees increased steadily from 2009 to 2020. The frequency of remuneration increases dropped sharply due to the closure of the government, but then surged to record highs in 48 years. Reports of rising selling prices have followed a similar path, but more often than earning rewards, reversing many of the historical relationships. Reports of rising prices are far ahead of reports of rising compensation, suggesting that other forces such as supply shortages and energy costs are pushing prices up.

Over the last 48 years, labor costs have not been a major issue (Chart 1). But in the last two years, it has skyrocketed to the highest level of concern in 48 years. Until inflation became the biggest problem, the availability of qualified workers was at the top of the list of most important issues. The shortage of qualified workers (applicants) was the driving force behind the surge in reported compensation growth. Job vacancies have historically remained at a high level, as do the percentage of owners trying to hire and the percentage of owners reporting that there are few or no qualified applicants. 61% of owners (92% of those hiring or trying to hire) reported that there were few or no qualified applicants for the position they were trying to fill. Thirty-three percent of owners reported few qualified applicants for the job category, and 28% reported nothing (one point shy, the highest record in 48 years). Many factors can disqualify an applicant, including inexperience, required skills and training, social skills and poor appearance. Keep in mind that this is the main street, not Silicon Valley, a technology-oriented place.

Currently, the market is experiencing supply problems and lacks well-qualified workers, so it is not quickly resolved by the higher wage role of attracting more workers, and market imbalances are resolved. It has been. With less than 500,000 employment levels in 2020, owners find value in adding new workers, generating more production and servicing their customers. Viruses, government benefit payments, demographics (eg retirement and death), to name a few, are at work. This is a healthy process, but the recession changes the situation as there are no more jobs and workers are unemployed.

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