Small biz mood darkens amid 'roller coaster' of Delta variant, hiring 'struggle'

As entrepreneurs navigate the changed economic landscape of the COVID-19 era, small U.S. businesses are increasingly pessimistic about the recovery — and are still scrambling to fill open jobs in a way that’s impacting their ability to function.

Last week, the National Federation of Independent Businesses (NFIB) reported that its Small Business Optimism Index dropped 2.8 points in July to 99.7, reversing the gain from the previous month.

Bill Dunkelberg, the NFIB’s chief economist, said in a statement that the sector is “losing confidence in the strength of the economy and expect[s] a slowdown in job creation.” That sentiment dovetails with growing worries on Wall Street about “peak growth,” with the second quarter potentially becoming the high water mark for the year.

As the labor market steadily recovers from the effects of the pandemic, with the economy churning out 943,000 jobs last month, the Main Street economy is still suffering, especially as the COVID-19 Delta variant spreads unchecked.

From rising inflation, concerns over Delta and the difficulties finding workers, small business owners are anticipating a slower rate of recovery in the coming months.

The NFIB data showed the red-hot labor market is of little help to small businesses, with 49% saying they can’t fill open jobs — the survey’s highest in nearly 50 years. In fact, the uncertain environment has led small businesses to become more pessimistic about sales expectations over the next 3 months, the survey found.

“There’s just such an unknown for the longevity of these struggles,” Ricky Gomez, owner of Palomar, a bar and restaurant in Portland, Oregon, told Yahoo Finance in an interview.

“Hiring has been a little bit of a struggle,” he added.

Even with an improved jobs picture, employers like Gomez have had to reduce hours and limit their days of operation, because there simply isn’t enough staff to run them at full capacity.

“We were open seven days a week,” Gomez said. “Now we're only open four days a week. So we're basing our operating hours on the staffing that we have.”

'It's been a roller coaster'

The national unemployment rate is heading in the right direction, with July’s data showing the strength of the recovery in hiring. But the quality of labor ranked as businesses’ “single most important problem,” with 26% of the respondents selecting it among 10 issues, the NFIB found.

Meanwhile, job openings have surged to over 10 million, according to the Labor Department, hitting a record high. The figures imply that there are over one million more jobs available than people who are searching for them.

A large number have come from the beleaguered food and beverage industry, where workers laid off by COVID-19 lockdowns have left in droves.

“There has been a huge Exodus from the [restaurant] industry over the past year and a half and being able to find people has been tough,” said Gomez.

While the labor shortage is a big problem for small businesses, the NFIB optimism survey results show inflation as a worry too: 44% are planning to hike prices in the next three month.

For restaurant owner Gomez, he’s navigating a number of factors that are forcing him to raise prices. Even as many chains recover from the pandemic, business owners are grappling with widespread inflation in labor, food costs, construction materials and real estate.

“We have already raised our prices,” Gomez said. “It's not something that we can wait to do. It's something we need to do now.”

While some restaurants, including Palomar, have been able to benefit from the revitalization grants to help stay afloat, the strain in the supply chain and the price hike in the cost of goods remains a hurdle for businesses trying to survive.

“We still have to call our paper supplier and say ‘are our gloves coming in this week?,’” Gomez said.

As the COVID-19 resurgence becomes a bigger concern to the economy, business owners from Main Street to Corporate America are getting increasingly nervous about what the next six months will look like. And nationwide, the reversal of local provisions that had allowed vaccinated patrons to be in public spaces without masks has only amplified the confusion and angst among small businesses.

“We are here today with just a lot of uncertainty and a lot of people are still just wondering about this Delta variant and the long-term effects, the vaccinated and unvaccinated, mask no mask,” said Gomez.

“It's been quite a roller coaster.”

Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter: @daniromerotv

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