Is the Job Market Improving?

Job Market Resilient: Amidst expectations of a labor market downturn due to rising interest rates, the latest National Federation of Independent Business (NFIB) employment report presents a different picture. Small businesses in the U.S. job market are intensifying their hiring plans and increasing wages, underscoring the persistent worker shortage.

While job openings have declined from their peak levels and the economy has cooled after the post-Covid rebound, NFIB Chief Economist William Dunkelberg reveals a labor market that remains tight. According to the survey, 44% of owners reported unfilled job openings, only 1 point lower than in April. Despite surpassing the 23% historical average, this figure falls 7 percentage points below the record high of 51% achieved in May 2022. Industries such as construction, transportation, and manufacturing exhibit the highest rates of reported job openings.

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Despite overall pessimism about the future, small business owners are witnessing sufficient current customer demand, prompting them to expand hiring and increase wages. Dunkelberg highlights that a net 19% of owners plan to create new jobs in the next three months, a 2-point increase from April. While hiring plans show a downward trend, they remain historically robust in the face of a weakening economy.

The NFIB survey also indicates that worker paychecks will experience at least a nominal boost in the short term. In May, 63% of owners reported hiring or attempting to hire, a 3-point rise from April. Moreover, a net 41% of owners raised compensation, marking a 1-point increase from the previous month. Although it falls 9 points short of the record high set in January last year, a net 22% of owners plan to raise compensation in the coming three months.

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Looking ahead, it is hoped that impending changes to federal benefits eligibility, included in the debt-limit bill, will incentivize more individuals to join the workforce. The demand for additional workers remains evident in small businesses across the country.

While the Department of Labor will release the May employment report for the entire economy on Friday, it is worth noting that among small firms, opportunities for workers remain historically abundant, offering an encouraging outlook in the job market.