For more than a year, small business employers have struggled to fill open positions. And while 51% are still trying to find workers for those posts, there's been a significant shift in the labor situation this summer.
Now, 45% say they've put any hiring on hold, largely because of high labor costs and skyrocketing inflation, and an average of 4% say they're starting to reduce their staffing to improve the financial health of their businesses.
To further illustrate the economic landscape contributing to this situation, only 26% of all SMBs tell us they've fully recovered to pre-COVID revenue levels, and 60% say their labor costs have increased. In fact, 18% say wages required by workers are now 25% higher than they were before COVID.
This news comes from Alignable's July Hiring Report, based on a poll of 5,350 small business employers conducted from 5/10/22 to 7/19/22.
Beyond responding to labor costs and inflation, several poll takers also noted that they're bracing for the negative effects of a potential recession. In a related survey of 4,739 small business owners, conducted from 6/23/22 to 7/19/22, 48% said they believe we are already in a recession, and another 32% predict it's coming later this year.
Finally, some employers noted that they have learned to live without the extra staff, making other changes and/or working longer hours themselves.
Hiring Freezes & Layoffs: More Common In Key Sectors
Some industries that are cutting back most on their hiring plans, include gyms, real estate, transportation and retail.
Here's what small business employers in the following industries told us regarding their hiring situation right now:
- Gyms: 66% have hiring freezes in place.
- Real Estate: 63% of firms are not hiring this summer and 5% of that group are instituting layoffs. Rising interest rates and a lack of inventory are two reasons behind this change.
- Transportation: 58% are not hiring right now.
- Retailers: 57% have ceased hiring, and 3% are also letting workers go.
- Car Dealers/Repair Shops: 55% have put a hold on hiring, and 5% are implementing layoffs.
- Finance/Accounting Firms: 54% say they've stopped hiring now.
- Dentist Offices: 50% are not hiring.
- Plumbers: 50% have stopped hiring, and, of that group, 6% are starting to lay off workers.
- Law Firms: 45% have stopped hiring for now.
- Construction Companies: 42% are no longer hiring, and 4% are also letting people go. (Some poll takers noted that investment in new construction is starting to slow down, because of recessionary fears).
- Restaurants: While many are still trying to fill open positions, 38% say they can't currently afford to add workers, and 4% feel compelled to reduce their headcount just to stay in business.
- Beauty Salons: 34% tell us they've put a hold on hiring for now.
In the coming months, we'll watch these industries closely to see if business picks up to the extent that they'll be able to start hiring again.
Effects Are Even Higher Among Minority-Owned Firms
Examining the demographics of our poll takers, we see, yet again, that disadvantaged, small firms are having an even harder time with this latest chapter of the hiring crisis.
58% of minority business owners said they must implement a hiring freeze right now to help their chances of staying afloat. Of that group, 2% say they plan to lay off workers, as well.
More than half of the women-owned companies (51%) polled are not hiring right now, along with 45% of non-minority-owned firms, and 40% owned by veterans.
Some 4% of non-minority-owned firms plan to reduce their staffing. About 3% of women-owned firms will need to let some employees go; and for veterans, that number is 2%.
The Top 5 states with issues around inflation-driven, small business hiring freezes are:
- New Jersey -- 64% of SMBs say they aren't hiring new employees right now, and 8% of that group is implementing layoffs.
- Florida -- 63% won't be hiring right now, either, and 5% feel compelled to let some staffers go.
- Texas -- 52% have suspended hiring, and 4% plan to lay off staffers.
- Virginia -- Like Texas, a slight majority (52%) of SMBs say they need to put the brakes on hiring for now. But in Virginia, 14% of these small business owners also feel they'll need to start letting staffers go.
- California -- 49% of California-based SMBs say they're not in the position to hire anyone new right now, and 3% say they need to reduce their workforce for the survival of their businesses.
A few other states aren't far behind. These include:
- Pennsylvania with 48% of SMBs there implementing hiring freezes, and 2% of those starting to lay off workers.
- Ohio, where 47% of small business owners taking the poll told us they're not able to hire right now due to labor costs and inflation. And 4% of them also will reduce their workforce.
- New York at 41%, Massachusetts at 39%, and Colorado at 33%, with none of these small businesses planning to start layoffs (at least not yet).