Despite strong job growth in February for the economy, small businesses continue to face challenges in finding workers on Main Street.

• In February, the nonfarm payrolls increased by 678,000 and the unemployment rate decreased to 3.8%, exceeding expectations with stronger job gains.
• Despite the job recovery, small businesses with fewer than 50 employees continue to face labor shortages.
• A recent CNBC/SurveyMonkey Small Business Survey revealed that 52% of small business owners find it more challenging to hire qualified individuals compared to the previous year.

Despite the latest nonfarm payrolls report indicating a labor market recovery, small business owners in the U.S. face challenges in finding and retaining qualified employees.

The Labor Department's Bureau of Labor Statistics reported on Friday that February experienced its largest monthly job growth since July, with nonfarm payrolls increasing by 678,000 and the unemployment rate at 3.8%, its lowest level since before the pandemic.

In 2021, the U.S. added 6.665 million jobs, marking the largest single-year gain in American history, as President Joe Biden mentioned in his State of the Union address. Despite this, the job market is still one million (1.14 million) workers short of its pre-pandemic level, with a significant gap remaining in filling open positions, which stood at over 10 million at the end of last year.

The labor struggle persists on Main Street, with companies with 500 or more workers adding 552,000 positions in February, according to ADP’s private payrolls report. This accounted for almost all of the job gains tracked by ADP, while companies with fewer than 50 employees recorded a loss of 96,000 employees during the month.

A recent CNBC/SurveyMonkey Small Business Survey found that 52% of small business owners reported it being more difficult to find qualified candidates for hire compared to a year ago, an increase from 50% in Q4 2021.

Small business owners with more than 50 employees expect turnover to be a problem for their business six months from now, while 29% of small business owners have positions that have been open for at least three months that they’ve been unable to fill.

Struggles to find workers

According to Laura Wronski, senior manager of research science at the company that conducts the survey for CNBC, the current hiring market is incredibly challenging due to the low unemployment rate and high inflation. As a result, wages must be high to attract workers.

The latest nonfarm payroll report reveals a decrease in the rate of wage inflation, as wages increased by only 0.03% per hour, compared to predictions of a 0.5% increase. The year-over-year increase was 5.1%, significantly lower than the anticipated 5.8%.

Despite the increase in newly eligible workers seeking employment during the "Great Resignation," small businesses continue to face challenges in hiring.

In February, NFIB's monthly jobs report revealed that 22% of small business owners identified labor quality as their top business issue, while the percentage of those citing labor costs as their top problem remained close to a 48-year record high.

Jennifer Park, owner of WearEver Jewelry in Alexandria, Virginia, stated that she faces challenges not only in hiring qualified staff but also in retaining them.

Park faced challenges in finding a suitable replacement after an employee left her role to care for her child in July. Despite posting a job listing on SimpleHired, she received only 21 applicants over a two-month period. Although she hired someone from the process, that person quit three weeks after starting without notice, leaving her back at the starting point. Additionally, the person she hired for roughly two weeks tested positive for Covid-19 and stepped away following that, and several applicants did not show up for scheduled interviews.

Park stated that finding, training, and onboarding individuals for the job is a time-consuming and expensive process, which has been frustrating.

According to Park, several factors contribute to the difficulty in hiring new employees, including the fact that many workers, particularly women, must stay home to care for their children.

Nearly 1.1 million fewer women were in the labor workforce in February 2022 compared to 2020, while men have recouped all of their job losses since the pandemic began, resulting in a growing gap that is being exacerbated by childcare concerns.

Park stated that we are not attracting the desired applicants because if they have children, they have had someone to take care of them or they haven't had school to send them to.

She observed that working in a retail environment for a small business frequently entails weekend work, making it "lower on the totem pole" compared to other jobs available.

Despite her efforts to enhance the incentives and expand sales commission opportunities, Park faces the same obstacles as most businesses due to escalating expenses and supply chain disruptions.

Despite government measures like the American Rescue Plan, many small businesses are still facing financial difficulties, according to Didier Trinh, director of policy and political impact at Main Street Alliance.

Although small businesses have consistently demonstrated their resilience and adaptability to rapidly changing circumstances, they are not as profitable as they were prior to the pandemic, he stated.

Attractiveness of roles waning

In February, the leisure and hospitality industry experienced job growth of 179,000, while employers on Main Street continued to struggle with finding the necessary workers.

Marie Raboin, co-founder of Brix Cider in Mount Horeb, Wisconsin, stated that attracting people back into the restaurant and foodservice sector has been a challenge for her 20-person company, as opportunities in other industries have expanded.

She stated that service industry workers were able to secure 9-to-5 jobs with comparable pay, weekends off, and benefits, which she believed was a reasonable decision.

Raboin has increased salaries and considered providing additional benefits, such as free yoga classes at a nearby studio, but this has not led to an increase in new applicants. Recently, she stated that she received only one application for a job that was advertised for three weeks.

"We're willing to be more patient with hiring than just working longer hours," she said.

Raboin anticipates that hiring will be challenging for the near future, particularly in her field, given that larger companies in other sectors are increasingly providing more attractive incentives to potential employees.

In the 80s, my parents had good-paying jobs as a waitress and bartender, respectively, which allowed them to raise a family. However, the economy has not improved for those sectors, making it difficult for people to find better jobs.

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