Dive Brief:

• Optimism among small businesses rose last month amid expectations of increasing sales and stronger earnings, the National Federation of Independent Business said Tuesday in a monthly survey report.
• At the same time, demand for labor among small businesses remained weak in August, aligning with an economy-wide trend. The portion of business owners reporting difficulty filling jobs fell to 32%, 1 percentage point less than in July, the NFIB said. Unfilled job openings dipped below 32% in July 2020, during the pandemic.
• “Optimism increased slightly in August with more owners reporting stronger sales expectations and improved earnings,” NFIB Chief Economist Bill Dunkelberg said. “While owners have cited an improvement in overall business health, labor quality remained the top issue on Main Street.”

Dive Insight:

In yet another sign of cooling demand for labor, the proportion of small businesses reporting that they are hiring or trying to hire slumped to 53%, or 4 percentage points lower than in July, the NFIB said.

The NFIB survey coincided with a record revision of job growth during the 12 months through March. Payroll growth will probably be slashed by 911,000, or 0.6%, according to a Bureau of Labor Statistics preliminary report released Tuesday.

In addition, the Labor Department said on Friday that overall U.S. hiring fell last month across the economy, and unemployment rose to 4.3%.

Employers added a less-than-forecast 22,000 jobs in August, the Labor Department said, while noting in a revision that payrolls in June shrunk by 13,000 jobs in the first such decline since December 2020.

The report primes the Federal Reserve to trim the main interest rate during a Sept. 16-17 meeting from a range between 4.25% and 4.5%.

The outlook on the labor market among consumers — who fuel nearly 70% of economic growth — dimmed last month.

The perceived probability of losing one’s job in the next 12 months rose by 0.1 percentage point to 14.5%, 0.5 percentage point above the 12-month trailing average of 14%, the New York Fed said Tuesday in a report on an August survey.

Consumers in August saw a 44.9% probability of finding a job after the loss of current employment, a 5.8 percentage point slump compared with July, the New York Fed said Tuesday.

Among small business owners, reduced hiring is just one sign of their wariness as they face a murky business outlook, according to Mark Valentino, head of business banking at Citizens.

“Many small business owners are approaching economic uncertainty with caution, reevaluating expenses, hiring selectively and managing debt with discipline,” Valentino said in a statement.

At the same time, 14% of small businesses reported their financial health as “excellent,” 1 percentage point higher than in July, the NFIB said. Also, 54% of small businesses said their financial wellbeing was “good,” an increase of 2 percentage points from July.