NFIB Jobs Report: Small Business Labor Costs and Hiring Challenges Ease in December

Small business labor costs eased in December, according to the latest jobs report from the National Federation of Independent Business (NFIB). The report found that fewer businesses are raising compensation and planning future increases, reflecting a gradual softening in the labor market.

• Unfilled Job Openings: Thirty-five percent of small business owners reported unfilled job openings in December, a one-point decrease from November.
• Hiring Efforts: Fifty-five percent of small businesses reported hiring or trying to hire, unchanged from November. However, 49% of these employers reported few or no qualified applicants for their open positions, up one point.
• Sector Breakdown: Job openings remained highest in the transportation (61%), construction (41%), and manufacturing (38%) sectors. Conversely, agriculture (22%) and finance (19%) reported the lowest percentage of unfilled positions.

“Finding qualified workers remained a major headwind for stronger job growth on Main Street in December,” said Bill Dunkelberg, NFIB Chief Economist.”In the meantime, compensation increases have softened among small businesses, but remained solid as the year came to an end.”

The report indicated a slowdown in wage growth among small businesses:

• Current Compensation: A net 29% of small business owners reported raising compensation in December, down three points from November and marking the lowest level since March 2021.
• Future Compensation Plans: A net 24% of small businesses plan to increase wages in the next three months, down four points from November’s peak.

Labor costs remained a significant concern, with 11% of small business owners citing it as their most important problem.

Construction faced notable hiring challenges, with job openings down 13 points from November and 17 points from December 2023. This sector, along with transportation and manufacturing, continues to report difficulty finding skilled workers.

The report also highlighted that 28% of business owners reported few qualified applicants, while 21% reported none at all—a two-point increase in the latter category.

• Hiring Plans: A seasonally adjusted net 19% of small business owners plan to create new jobs in the next three months, up one point from November. This level of optimism in hiring plans is the highest since May 2023.
• Economic Growth: The broader economy remains resilient, supported by strong consumer spending and government programs tied to education, healthcare, and social services. The U.S. Bureau of Labor Statistics reported 227,000 jobs added in November, with wage growth of 4% over the past year.

Despite easing compensation pressures, small business owners continue to face challenges in finding qualified workers. Labor quality was cited as the top operating problem by 19% of respondents, unchanged from November.

Looking ahead, NFIB noted that small business owners are optimistic about 2025 policy changes but remain cautious as they await clarity on congressional and administrative agendas.

The NFIB Jobs Report, based on responses from 513 small business owners, provides insight into the hiring and labor trends shaping Main Street businesses at the close of the year.