Hiring challenges continue to plague small businesses, particularly within the construction and transportation sectors, as highlighted in the latest jobs report. In January, 35% of small business owners reported unfilled job openings, maintaining the same level from December.
Job vacancies were most notable in the transportation, construction, and manufacturing industries, while agriculture and finance saw the fewest vacancies. The construction sector experienced a four-point rise in job openings from December, yet it remains two points lower than in January 2024.
Despite facing these hiring challenges, small business owners maintain a hopeful outlook for the economy. However, the quest for qualified employees remains a pressing concern. In January, 52% of small business owners reported actively hiring or attempting to hire, reflecting a three-point decrease from the previous month. Of those trying to hire, a significant 47% encountered few or no qualified applicants. Specifically, 24% noted few qualified candidates, and 23% reported having no qualified applicants at all.
There is still strong demand for skilled labor, with 29% of businesses seeking skilled workers, unchanged from December, while 10% had openings for unskilled labor, a drop of three points. Despite these hurdles, 18% of business owners plan to expand their workforce in the next three months, though this represents a slight decline from December.
Labor quality remains a primary operational concern, although the percentage of owners identifying it as their biggest challenge decreased to 18%. Concurrently, labor costs as the top business issue fell to 9%, significantly below the 13% peak recorded in December 2021.
In response to hiring challenges, 33% of small business owners increased compensation in January, a four-point rise from December’s lows. However, plans for future wage increases have declined, with only 20% indicating intentions to raise compensation within the next three months, a decrease of four points from December.
Looking ahead, while hiring difficulties are anticipated to persist, small businesses remain cautiously optimistic about the economic landscape. The ongoing tight labor market, coupled with a shortage of qualified applicants, continues to present challenges, particularly for industries dependent on skilled labor. Nevertheless, compensation increases suggest that businesses are proactively adjusting their strategies to attract talent and sustain operations during this period of workforce shortages.
