In the month of February, inflation and labor quality were both leading issues small business owners face as inflation remains elevated above the Federal Reserve’s target and the labor market has continued to prove resilient. The Consumer Price Index (CPI) data, released earlier this month, showed the inflation rate is currently sitting at 3.1 percent year over year, down from last month, but coming in higher than expected. Core CPI, which excludes the more volatile measurements of food and energy, increased 0.4 percent. 23 percent of small business owners reported labor quality as their top problem, surpassing inflation as the top issue. In addition to the worse-than-expected economic data, the National Federation of Independent Business (NFIB) monthly Small Business Optimism Index decreased by 2.0 points to 89.9, marking over two consecutive years spent below the 50-year average of 98 percent. Small businesses have struggled to keep up with price increases, with reports of positive profit trends dropping to a net negative 30 percent, a very poor reading. In addition to poor profit trends, future business outlooks have worsened, with a net negative of 38 percent of small business owners expecting better business conditions over the next six months, down two points from last month. While inflation rates have fallen from their 2022 peak, progress on bringing it down to the Federal Reserve’s two percent goal has been a bumpy road, and a strong labor market could prove to be an impediment going forward. With the labor market and consumers remaining strong, the Federal Reserve isn’t expected to cut interest rates until their May or June meeting, delaying relief that Main Street needs to fully begin recovering.

The below February 2024 Small Business Snapshot features numbers and updates to provide more insight into the current small business economy.

MAIN STREET MEASUREMENTS:

CONSUMER PRICE INDEX (INFLATION)

• The prices consumers paid for goods and services increased 0.3 percent in January as compared to December and totaled a 3.1 percent increase when measured over the last 12 months.

PRODUCER PRICE INDEX

• Wholesale prices rose 0.3 percent in January and had an increase of 0.9 percent year over year.

JOB OPENINGS

• At the end of December, businesses were unable to fill 9.0 million jobs, 3.4 million workers quit their jobs, and the number of layoffs and discharges changed little.

UNEMPLOYMENT RATE

• 353,000 jobs were created in January, and the unemployment rate was unchanged at 3.7 percent.

LABOR FORCE PARTICIPATION RATE

• The labor force participation rate remained unchanged at 62.5 percent in January.

UNEMPLOYMENT INSURANCE WEEKLY CLAIMS

• For the week ending February 10, 2024, the Department of Labor reported that initial unemployment claims were 212,000, a decrease of 8,000 from the previous week’s level.
  • The 4-week moving average of initial claims totaled 218,500, an increase of 5,750 from the previous week’s average.

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