Labor costs for small businesses decreased in December, according to the latest jobs report. The data indicates that a declining number of businesses are increasing wages and planning future hikes, suggesting a gradual softening in the labor market.
- Unfilled Job Openings: In December, 35% of small business owners reported unfilled job vacancies, a slight decrease from the previous month.
- Hiring Efforts: 55% of small businesses reported efforts to hire, remaining steady since November, though 49% of these employers noted a lack of qualified applicants, marking a slight increase.
- Sector Breakdown: Job openings were most prevalent in the transportation (61%), construction (41%), and manufacturing (38%) sectors, while agriculture (22%) and finance (19%) had the fewest unfilled positions.
“The challenge of finding qualified workers continued to impede job growth for small businesses in December,” said an industry expert. “Although wage increases have softened, they stayed robust as the year concluded.”
The report revealed a slowdown in wage growth for small businesses:
- Current Compensation: A net 29% of small business owners reported raising wages in December, a decline of three points from November, the lowest since March 2021.
- Future Compensation Plans: A net 24% plan to boost wages in the upcoming three months, down four points from last month’s peak.
Labor costs persist as a major concern, with 11% of small business owners identifying it as their primary issue.
The construction sector faced significant hiring obstacles, with job openings dropping 13 points from November and 17 points compared to December 2022. This industry, along with transportation and manufacturing, continues to struggle in securing skilled labor.
The report further indicated that 28% of business owners cited a shortage of qualified applicants, and 21% reported having none—a two-point increase in the latter category.
- Hiring Plans: A seasonally adjusted net 19% of small business owners plan to add jobs in the next three months, marking a one-point increase from November and the highest level since May 2023.
- Economic Growth: The broader economy remains resilient, bolstered by robust consumer spending and government programs focused on education, healthcare, and social services. The latest reports indicated that 227,000 jobs were added in November, with wage growth at 4% year-over-year.
Despite a decline in compensation pressures, small business owners are still encountering difficulties in finding qualified workers. Labor quality remains the top operational challenge for 19% of respondents, unchanged from the previous month.
Looking forward, there is optimism among small business owners regarding policy shifts in 2025, although they remain cautious while awaiting clarity on upcoming congressional and administrative agendas.
This jobs report, derived from the responses of small business owners, offers valuable insights into the hiring and labor trends impacting Main Street businesses as the year draws to a close.
