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Small Businesses Expect Hiring Will Be Their Biggest Need Over Next 6 Months
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Across the country, businesses are looking to get back to something near “normal.” But many small business owners say they’re having trouble finding new workers. In fact, 21% say employee availability has impacted their ability to do business, according to the U.S. Census Bureau’s Small Business Pulse Survey.
But why is this happening? Some point to the supplemental federal unemployment benefits, saying it incentivizes unemployment and makes hiring more difficult. Some states have pulled out or are pulling out of the supplemental program ahead of the federal cutoff in September.
To find out how widespread this hiring issue is and see how small businesses plan on approaching the next six months, LendingTree researchers analyzed national and state data from the Small Business Pulse Survey. Here’s what they learned.
- Key findings
- Top need for small business owners: Identifying and hiring new employees
- Montana is the most in need of workers over the next 6 months
- Wyoming is the least in need of workers over the next 6 months
- Full rankings
- Accommodations and food services sector most in need of identifying and hiring new employees
- 3 hiring strategies amid coronavirus pandemic
- Small business owners will focus on identifying and hiring new employees over the next six months. 36% of businesses say hiring new employees in the next six months is their top need. Meanwhile, 21% of small business owners say the availability of employees to work has affected their ability to do business.
- While hiring employees is the most commonly cited plan of action, even more businesses don’t plan on hiring. 38% of businesses say hiring isn’t on their radar for the next six months. And 65% of small businesses say they’re not having issues with the availability of workers.
- Montana small business owners are the most in need of workers. According to a LendingTree analysis of the survey data, 52% of small business owners in the state say they plan on hiring over the next six months.
- Wyoming business owners are the least in need of workers. Just 20% of businesses say they plan on adding employees to payroll in the next six months.
- The industries looking to hire were heavily impacted early amid the coronavirus crisis. Accommodation and food services has the highest rate of small business owners looking to hire at 60%, followed by manufacturing at 46%.
Top need for small business owners: Identifying and hiring new employees
When small businesses were asked about the next six months, 36% cited identifying and hiring new employees — making it the top future need going forward. And given the circumstances, it’s not surprising.
“Every company everywhere is hiring,” LendingTree chief credit analyst Matt Schulz says. “It’s an enormously competitive time in the job market, and companies are being forced to explore every option to attract top talent. That means everything from changing their remote working policy to offering big salaries to providing unlimited time off.”
Aside from finding new hires, other top concerns for businesses include:
- Increasing marketing or sales (28%)
- Identifying new supply chain options (17%)
- Making a capital expenditure (16%)
At the same time that businesses are looking for new employees, 21% of small business owners say the availability of workers has affected their ability to do business.
Part of the problem could be vaccination rates, which have slowed significantly compared to the peak in April 2021. That’s especially relevant to companies that require in-person work, as the pandemic has deeply impacted those businesses.
Other commonly cited challenges to small businesses were:
- Availability of supplies or inputs needed to do business (14%)
- Physical distancing of customers or clients and/or limits on the number of customers or clients (7%)
Still, the most common response about future needs was “none of the above,” meaning 38% of businesses aren’t looking at hiring in the next six months. And nearly two-thirds (65%) of small businesses say they’re not having issues with the availability of workers.
Montana is the most in need of workers over the next 6 months
More than half of Montana businesses say finding employees will be a priority over the next six months. Unfortunately for those searching for new workers, the state’s unemployment rate is 3.6%, more than 2 percentage points below the U.S. average of 5.8%.
That labor shortage may prove difficult, especially for small businesses facing competition from larger operations and the resources that come with those.
So it isn’t surprising that 28% of small business owners in the state say the availability of workers affects their operating capacity. It’s worth noting that the state has pulled out of the supplemental unemployment benefits program, which provided an extra $300 weekly. That could increase the potential applicant pool.
The remaining top 10 states that say finding employees will be a priority are:
|States most in need of workers|
|State||Percentage of businesses that need to hire|
Like Montana, most of these states’ unemployment rates are lower than the national average. (The notable exception is Colorado at 6.2% in May.) That trend could prove an obstacle for small business owners looking to hire.
When it comes to supplemental unemployment benefits, these states primarily leaned toward early termination. Missouri, New Hampshire, Ohio and South Carolina already stopped participating in the supplemental program, while legislation in Wisconsin and Michigan could pave the way for an earlier end. That could mean more individuals in those states having to reenter the workforce.
However, in the remaining three states that haven’t announced plans to discontinue the supplemental unemployment payments (Colorado, Virginia and Vermont), those funds will be available through Sept. 6, when the federal program ends.
Wyoming is the least in need of workers over the next 6 months
At the opposite end of the spectrum, Wyoming small businesses were least likely to cite hiring needs as a priority over the next six months, with just 20% reporting so. This makes sense as total nonfarm employment jumped by 10,000 jobs between May 2020 and May 2021.
Wyoming businesses are also facing fewer issues regarding the availability of workers and how that’s affecting operating capacity (17% report issues there). This is despite a state unemployment rate of 5.4% in May, 0.4 percentage point below the national average of 5.8%.
Here are the states rounding out the bottom 10:
|States least in need of workers|
|State||Percentage of businesses that need to hire|
Five of these bottom 10 states had unemployment rates above the national average in May:
- Delaware: 5.9%
- Mississippi: 6.1%
- Alaska: 6.7%
- Louisiana: 7.1%
- New York: 7.8%
So residents of these states looking for jobs could be left with fewer job options for small businesses.
At the same time, seven of the bottom nine states — South Dakota, West Virginia, Mississippi, Alaska, Oklahoma, North Dakota and Louisiana — have ended or have plans to end the supplemental $300 unemployment benefits ahead of the federal cutoff date.
This combination of decreasing unemployment support and fewer small businesses hiring could spell difficult times ahead for job-seekers in those states.
Accommodations and food services sector most in need of identifying and hiring new employees
From an industry perspective, hiring is primarily an issue in the accommodations and food sector, followed by manufacturing. It’s not surprising: Widespread lockdowns presented a particular challenge for these industries, especially at the beginning of the pandemic.
Part of the problem for these industries is a lack of flexibility.
Other sectors facing hiring difficulties include:
- Administrative and support and waste management and remediation services (39%)
- Educational services (38%)
- Health care and social assistance (38%)
3 hiring strategies amid coronavirus pandemic
Navigating hiring during this time requires businesses to have a pulse on what job seekers want. Here are three strategies that can help:
- Focus on flexibility: “Flexibility is paramount,” Schulz says. “Until life returns fully to normal, whenever that may be, companies just have to be willing to give their employees more autonomy and trust them more to do the right things. Permanent work-from-home options are an excellent idea. Companies can also offer more flexible work hours.”
- Keep prioritizing health and safety: The pandemic may feel like it’s coming to a close, but its impact remains. And businesses need to keep that in mind when hiring. “Whether that is about offering better health insurance, more flexible sick time off and more accessible mental health resources, or simpler things like making hand sanitizer and other such things readily available, there’s plenty that small businesses can do,” Schulz says.
- Consider your child care support offerings: For many parents, the pandemic brought the importance of spending time with the family to the surface. That means traditional child care options offered by companies may not be up to par. Flexible work hours (as well as full- or part-time work-from-home options) can be one way to help support working parents.
LendingTree researchers analyzed data from the U.S. Census Bureau’s Small Business Pulse Survey to find the percentage of businesses that plan on hiring workers in the next six months. We used data from Phase 5, Week 3 (May 31 to June 6, 2021) — the latest available at the time of data collection. LendingTree researchers also analyzed the factors affecting businesses’ operating capacity, focusing on the availability of employees to work.