While small businesses across America are finding ways to innovate and thrive in the post-pandemic era, they are still dealing with the fallout and consequences of the last two years.
“We know that challenges remain,” said Isabella Casillas Guzman, Administrator of the U.S. Small Business Administration. “We are still facing global supply chain, disruptions, inflation, and a tight labor market.”
To help entrepreneurs respond to these trends, CO— by the U.S. Chamber of Commerce hosted a Small Business Update offering an outlook on the economy and policies in the first half of 2022. Here are some key takeaways from that conversation.
Lack of goods and changing spending patterns have contributed to inflation
The United States is seeing inflation rates of 8.5%, according to the Bureau of Labor Statistics’ March 2022 Consumer Price Index — the highest they’ve been in almost 40 years.
Neil Bradley, Executive Vice President, Chief Policy Officer, and Head of Strategic Advocacy for the U.S. Chamber of Commerce, explained that there are two reasons we’re seeing such high rates of inflation right now: a lack of goods and a change in consumer spending.
“We had major disruptions in the production and the shipping of goods and in those supply chains,” said Bradley.
There was also a fundamental shift in how Americans spent their money that occurred during the early months of COVID-19.
“They went from spending money that used to go to services [like] travel or maybe going out to eat or seeing a show … to purchasing goods [that were] often … being delivered to their houses,” Bradley said.
This shift ended up causing an excess of money that wasn’t being spent at the expected pre-pandemic rate.
“Largely as a result of Federal Reserve policies over a number of years…Americans have over $2.5 trillion of excess savings compared to what they would have had if we’d stayed on baseline [from] before the pandemic,” explained Bradley. “All of that money is bolstering increased consumer demand.”
This mismatch between the number of available jobs and the number of people willing to fill them has become a major problem for small businesses that are looking to grow by hiring the right people.
Companies are still struggling to find top talent
As of March 2022, there are 11.5 million open jobs in America that employers are trying to fill — enough that there are two open jobs for every person who is looking for work. This mismatch between the number of available jobs and the number of people willing to fill them has become a major problem for small businesses that are looking to grow by hiring the right people.
According to Bradley, the current talent shortage is the result of several factors and groups of workers:
- People nearing retirement age. Some people who were near retirement age at the start of the pandemic decided that they could comfortably take early retirement. “It’s unclear whether they’re going to come back to the workforce,” said Bradley.
- Working parents. Bradley noted that there are an estimated 1 million mothers who were working pre-pandemic, but have not yet returned to the workforce due to a lack of available childcare.
- Legal immigrant workers. Heading into the pandemic, the United States placed restrictions on legal immigration to reduce the potential of COVID-19 coming into the country. “By some estimates, that’s about a million college-educated immigrants who would be in the workforce today, who aren’t because of those limitations,” Bradley explained.
Supply chain issues are improving, but persistent
The issues that are delaying supply chains make up one of the biggest economic obstacles. For a time, COVID-19 was disrupting the production of goods. Now, there is an issue with transferring goods directly to retailers.
Bradley shared that COVID-related disruptions at ports are going down; however, supply chains may not be running efficiently in the immediate future.
“The good news is those wait times on ships, the number of ships anchored off, [and] the delay in getting goods has come down dramatically,” said Bradley. “The bad news is that we just entered negotiations between the port operators and the longshoremen for their contract renewal.”
This contract renewal is approaching on June 30, said Bradley. This, he said, is creating some “uncertainty about whether we’re going to see a potential slowdown at the ports, or even a full strike … that might create new bottlenecks.”
Responding to and navigating each of these ongoing challenges is the key to small business survival and success in the years ahead.
“When we level up success outcomes for all of our 32.5 million small businesses, including those startups coming out of the small business boom … we can better succeed as a nation [in] growing our economy, increasing our global competitiveness, and strengthening our democracy,” said Guzman.
CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.