Small Business Optimism Index Hits All-Time Low

A "help wanted" sign in front of a restaurant in Los Angeles on Feb. 4, 2022. (Frederic J. Brown/AFP via Getty Images)

The NFIB Small Business Optimism Index fell to the lowest point in the 48-year history of the metric in June, as growing storm clouds on the horizon of the U.S. economy threaten the ability of small-business owners to maintain profits.

The NFIB index fell by 3.6 points to an unprecedented low of 89.9, reflecting the growing challenges of maintaining a small business in the 2020s economy. This makes June the sixth consecutive month in which the index was reported below the 48-year average of 98. However, the drop-off was significantly more severe than in May, when the index fell by only 0.1 point to what was then an all-time low of 93.1. The score this month suggests a rapidly worsening outlook for small-business owners, as many of the problems that have afflicted their enterprises show few signs of abating.

Most notable was the decline in the net percentage of business owners who expected higher sales, which fell by 13 percent to a net negative 28 percent. While consumer spending has been unusually high in recent years, signs suggest that the spending spree is coming to an end as consumers tighten their belts amid worsening inflation and recession fears.

The report by NFIB attests to the perennial issues that have battered the U.S. economy since the pandemic-related lockdowns began. Chief among these are inflation, labor shortages, and supply chain disruptions, all of which are reflected in the results of the NFIB survey.

Sixty-nine percent of respondents reported higher selling prices for their goods and services, whereas only 4 percent reported lower selling prices, reflecting the declining value of the U.S. dollar amid rampant inflation, which reached 9.1 percent annually in the most recent Consumer Price Index report (pdf).

Fifty percent of business owners reported job openings that they were unable to fill. While this actually constitutes a one-point decrease from May’s survey results, it is a testament to the challenges of a tight labor market for small-business owners. Eight percent said that labor costs was their primary issue, whereas 23 percent identified labor quality as their greatest challenge.

Thirty-nine percent of owners said that supply chain disruptions had significantly impacted their business, while 30 percent reported a moderate impact, and 23 percent reported a mild impact. A mere 6 percent claimed that supply chain disruptions had no impact on their businesses.

Given this convergence of factors, it is little surprise that small-business owners maintain such a dour outlook for the near- and medium-term futures of their businesses. While the degree of pessimism is significantly higher in June compared to the preceding month, it is of a pattern with recent months, and continues a calendar year with consistently worsening projections for small businesses and the economy at large.