- Beset by labor shortages and persistent inflation, 58% of companies raised wages during the third quarter, an increase from 51% during the prior three months, according to a survey by the National Association for Business Economics (NABE).
- The cost of materials rose during the third quarter for 70% of the 91 respondents to an Oct. 6-14 survey compared with 61% during the second quarter, the NABE said Monday. Among goods-producing companies, 85% charged higher prices from June until September and 92% expect to raise prices during the current quarter.
- “One-third of panelists indicates that the biggest downside risk to their company’s outlook is increased cost pressures,” according to Eugenio Aleman, chair of the NABE Business Conditions Survey and chief economist at the Energy Information Administration. The most important possible improvement in the business outlook is waning fears and infections caused by the coronavirus, cited by 31% of respondents.
CFOs face pressure to raise wages as COVID-19 crimps the availability of labor and inflation heats up to a multi-year high, stoked in part by supply chain delays.
Amid the challenges, optimism last month fell among small businesses to the lowest level since December 2012, with a record high 51% of business owners reporting an inability to fill job openings, according to a survey by the National Federation of Independent Business (NFIB).
The number of U.S. job openings in August eased compared with July but remained elevated at 10.4 million, the Labor Department reported this month. The portion of companies reporting a worker shortage rose to 47% during the third quarter from 39% during the prior three months, NABE said.
None of the respondents expect the labor supply to improve during the fourth quarter, and only 36% predict greater worker availability next year, according to NABE.
Skilled labor is especially scarce, with 47% of respondents reporting difficulty finding such workers during the third quarter compared with 32% during the prior three months, NABE said.
Meanwhile, the consumer price index rose last month at a 5.4% annual rate — the same rate as in June and July, which was the fastest pace in 13 years, the Labor Department said this month. Energy prices, a leading cost for businesses, rose more than other item categories.
Federal Reserve officials have steadily increased their estimates for the rise next year in the core personal consumption expenditures (PCE), their preferred inflation measure. In September last year they projected a 1.8% gain in core PCE during 2022. Now they forecast a 2.3% increase, according to estimates released last month.
One out of three respondents to the NABE survey identified increased cost pressures as their biggest risk, with 28% citing COVID-19 and 20% naming supply chain disruptions as the leading threat to their outlook.
The portion of NABE respondents who reported delays or shortages in receiving materials or other inputs rose to half from 40% during the second quarter.