US small business hiring plans drop to lowest since May 2020

Small businesses, the engine behind roughly 60 million American jobs, are pulling back on hiring at a pace not seen since the early months of the pandemic. The latest NFIB Jobs Report shows unfilled job openings fell to 29% in May, while net hiring plans slid to just +9%, both hitting their lowest marks since May 2020.

The numbers behind the pullback

The drop in unfilled job openings was sharp. In April, 34% of small business owners reported positions they couldn’t fill. By May, that figure had fallen five full percentage points to 29%.

Net hiring plans, which measure the share of businesses planning to add workers minus those planning to cut, fell to +9%. That’s a four-point drop from April and sits below the long-term historical average of +11%.

Despite the pullback in plans and openings, 55% of small business owners said they either hired or attempted to hire in May. That’s actually a slight uptick from the previous month.

Broader sentiment isn’t helping

The NFIB Small Business Optimism Index came in at 95.9 in April, and that figure has been sitting below its 52-year average in recent months. Compensation trends have remained stable despite the overall softening, suggesting employers are trying to retain the workers they already have even as they hesitate to bring on new ones.

What this means for investors

The fact that net hiring plans at +9% are already below the +11% historical average is the detail that should draw the most attention. Averages include recessions. Being below the long-run average means small businesses are currently less inclined to hire than they typically are across the full business cycle, including the bad parts of the cycle.

The next few months of NFIB data will be critical. If unfilled openings stabilize around 29% or recover, the May report becomes a one-month blip. If the decline continues into the low-to-mid 20s, the conversation shifts from “softening” to something considerably less comfortable.

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