Based on responses from 578 small business owners in the National Federation of Independent Business (NFIB) May survey, compensation plans have reached their lowest level since March 2021. This survey, conducted up to May 30, 2024, reveals critical insights into the current labor market and employment trends.
Employment Trends and Job Creation
The U.S. Bureau of Labor Statistics reported the creation of 175,000 jobs in April, lower than the average of 250,000 jobs per month over the last year. Revisions for February and March subtracted 22,000 jobs from previous estimates, leaving the unemployment rate steady at 3.9%. Despite solid hiring plans among small business owners, many struggled to fill positions. In May, 42% of owners reported job openings they could not fill, a 2-point increase from April. Skilled labor openings rose by 3 points to 37%, while unskilled labor openings dropped by 4 points to 14%.
Sector-Specific Job Openings
The labor market remains tight, especially in construction, manufacturing, and transportation sectors. Job openings in construction were down 1 point from April, with 54% of firms unable to fill positions. This trend was mirrored across manufacturing and transportation, whereas wholesale and agriculture sectors reported the lowest job
Industry | May-24 | May-23 |
Construction | 54% | 63% |
Manufacturing | 52% | 52% |
Transportation | 52% | 59% |
Services | 50% | 48% |
Professional services | 47% | 45% |
Finance | 40% | 29% |
Retail | 36% | 44% |
Wholesale | 26% | 36% |
Agriculture | 20% | 25% |
Hiring and Labor Quality Issues
A net 15% of owners plan to create new jobs in the next three months, up 3 points from April, marking the highest reading of the year. In May, 60% of owners reported hiring or attempting to hire, a 4-point increase from April. However, 51% of these owners found few or no qualified applicants for their open positions, with 29% reporting few qualified applicants and 22% reporting none.
Labor quality remains a significant issue, with 20% of owners identifying it as their top business problem, a 1-point increase from April. However, concerns over labor quality have eased over the past two quarters. Labor costs as the most pressing problem dropped to 10%, down from the peak of 13% in December 2021.
Compensation Trends
A net 37% of owners reported raising compensation in May, down 1 point from April but still historically high. This trend is concerning for inflation watchers. Looking ahead, a net 18% plan to raise compensation in the next three months, down 3 points from April, and the lowest level since March 2021.
Conclusion
The employment reports indicate that while the labor market has been strong, recent trends show signs of weakening, particularly in the production sectors. The employment situation will be a critical focus in the upcoming election period as candidates leverage these insights to support their policy proposals. Small business owners continue to navigate a challenging labor market with tight conditions and ongoing struggles to find qualified workers.
