There are at least 5 million firms with one or more employees in the U.S. The Small Business Association (SBA) classifies any firm with fewer than 500 employees as “small”. There are millions more of “one person” firms, and about 20,000 firms with more than 500 employees. In the most recent (December) NFIB Small Business Economic Trends (SBET) survey, 22% said that inflation was their top business problem, the second highest reading since July 2008. Inflation (CPI) averaged just 1.7% from 2010-2020. Rising labor and materials costs were not an issue. However, this changed dramatically beginning in 2021.
President Biden blames the surge in prices on large firms that dominate markets and collude to raise prices. It’s hard to explain a nearly 50% increase in used car prices by collusion among used car dealers. And millions of small firms spread across the U.S. can’t easily “collude,” but they are raising prices. There were more obvious and significant supply side problems that produced rising costs and prices such as the port congestion, lack of truck drivers, microchip shortage, and staffing issues that reduced the supply of inventory.
The SBET surveys also indicate how serious the supply chain disruptions have been and continue to be. Over a third report “significant” impacts on their firms, and only about 10% report they are unaffected. And, if there is a trend in the data, it is the wrong direction. Reports of significant impacts have risen over the past six months.
Small Business Economic Trends survey: Are supply chain disruptions impacting your business?
However, the demand side stimulus significantly increased spending by consumers, even as supplies were being restricted. The government sent out money (checks) to millions of consumers, including the unemployed. Armed with all that money, consumers descended on the “store shelves,” creating shortages. There are plenty of opportunities to make money if businesses could get the goods.
But it isn’t just a shortage of goods, it is also a shortage of workers to make and deliver the goods to customers. Even if more ships could dock, there is a shortage of workers to unload them, and truck and train capacity to deliver the goods across the U.S. And on Main Street, the shortage of workers is the worst it’s been in the last 48 years, even with record high reports of increase compensation and other inducements to attract more workers. NFIB’s December SBET survey found that 49% of small employers had job openings that could not be filled.
Unfilled Job Openings
Even with a record high percentage of owners reporting higher compensation to attract and retain workers, record high job openings …….