The mood is bleak on Main Street. While economists and Wall Street economists debate the likelihood of an economic downturn in the near future, small businesses are already bracing for tougher times ahead. More than 93 percent of small business owners are worried about the U.S. entering a recession within the next year, according to a new survey conducted by Goldman Sachs.
For the vast majority of small businesses, an economic slump is no longer a hypothetical scenario, it's already here. More than three-quarters of business owners -- 78 percent -- reported that the economy has worsened over the last three months.
Historic inflation, which rose by 9.1 percent in June, has hit small business owners hard. Eighty percent reported that inflationary pressures have increased over the last three months, and 75 percent said that rising prices have negatively impacted the financial health of their business. Two-thirds of small business owners have resorted to upping their own prices to keep up with increasing costs. The majority kept their price hikes under 10 percent.
Still, the highest prices since 1981 were not the biggest concern plaguing small businesses, according to Goldman Sachs. The labor shortage remains the most significant problem. Eighty-four percent of small business owners reported that workforce conditions have not improved over the last three months, while 41 percent said employment problems had only gotten worse. For over half of small businesses, the typical hiring process to fill an open position now stretches over two months. Business owners cited the fierce competition from larger companies in terms of pay and benefits as their biggest challenge in attracting talent.
Despite the slate of challenges facing small business owners with inflation, unfilled positions, and ongoing supply chain issues, two-thirds maintained confidence about the financial trajectory of their business for the rest of the year.