Small businesses struggle to fill job openings as labor costs rise

The National Federation of Independent Business (NFIB) released its November jobs report, revealing ongoing challenges for small business owners in the hiring market. The report showed that 36 percent (seasonally adjusted) of small business owners reported job openings they could not fill in November, an increase of one percentage point from October. Labor costs as the single most important problem for business owners rose to 11 percent, three points higher than the previous month and just two points below the record-high reading of 13 percent reached in December 2021.

“As the overall job market softens, hiring among small businesses remains a struggle,” said NFIB Chief Economist Bill Dunkelberg. “Main Street owners continue to feel pressure to raise compensation at historically high levels to attract and retain workers.”

State-specific data is unavailable, but NFIB State Director Rosemary Elebash highlighted the impact on Alabama businesses. “Finding qualified applicants has become one of the most stubborn challenges facing Alabama’s small businesses. Our members will continue to urge their legislators to come up with solutions that help prepare people to enter the workforce and fill the positions that are available,” Elebash said.

In November, a seasonally adjusted net 32 percent of small business owners reported raising compensation, a one-point increase from October. Additionally, a net 28 percent (seasonally adjusted) plan to raise compensation in the next three months, marking a five-point increase from October and the highest reading of 2024. However, the percentage of owners citing labor quality as their top operating problem fell by one point to 19 percent.

Small business owners are also planning to expand their workforce. A seasonally adjusted net 18 percent of owners reported plans to create new jobs in the next three months, up three points from October. Overall, 55 percent of owners reported hiring or trying to hire in November, two points higher than October’s lowest reading since January 2021.

Despite these efforts, hiring challenges persist. Forty-eight percent of owners (87 percent of those hiring or trying to hire) reported few or no qualified applicants for the positions they were trying to fill. Of those, 29 percent reported few qualified applicants, while 19 percent reported none.

Openings remain prevalent across various sectors. Thirty percent of owners reported openings for skilled workers (down one point), while 13 percent reported openings for unskilled labor (down one point). Job openings were highest in the transportation, construction, and professional services sectors, with construction seeing a five-point increase from last month. Over half of construction business owners (54 percent) reported having at least one position they could not fill. In contrast, job openings were lowest in the agriculture and finance sectors.

The data underscores the persistent struggle small business owners face in recruiting and retaining talent, with labor costs and workforce shortages remaining key challenges as the year comes to a close.