Some small business owners say they are backing off hiring as tariff-driven costs rise Bring new employees An untenable proposition.
When they bear the increased costs of import inputs and goods, companies are seeking to prune costs (including labor) elsewhere possible. Business owners say this could mean stopping when hiring, reducing workers’ time, or even laying off jobs. Smaller businesses lead larger companies to reduce head counts because they usually have less financial buffers that can waste them during periods of economic uncertainty.
Mike Roach, the owner of Paloma Clotsing, a men's and women's boutique in Portland, Oregon, told CBS MoneyWatch that while he hasn't given up any sales staff yet, he is reducing labor-related spending.
"We're not hiring and are trying to shave anyone who wants and has the ability," he told CBS MoneyWatch.
Roach said he is looking for ways to save to make up for a 22% drop in profits in May, compared to the same period a year ago. In the case of rising prices and general economic uncertainty, he attributed the decline in revenue to weak consumer demand.
Shayai Lucero is the owner of Earth & Sky Floral Designs, a single-person flower shop in Albuquerque, New Mexico. She said she hopes to bring another worker this summer to help ease her massive workload, but tariffs have caused her to reconsider her hiring agenda.
“I’ve been looking to hire someone to handle smaller business tasks so I can simplify my goals better,” she told CBS MoneyWatch. “But I’m in a place where I can’t even hire one.”
Lucero said the tariffs have raised the wholesale spending price so much that she was forced to charge customers more and could not raise the price further. “My clients can’t afford my price increases, and I’m even tired of breaking,” she said.
The share of small business owners planning to create new jobs in the next three months fell to 12% in May, compared with 13% in April from the National Federation of Independent Businesses (NFIB) work report in May.
"In uncertainty, small business owners' recruitment plans are still softening," NFIB chief economist Bill Dunkelberg said in a statement. "The compensation pressure has also eased, providing some much-needed relief for many owners."
Labor costs are the top concern for business owners, rising a point in May to 9%.
Experts say that moderation of recruitment makes sense given the current economic environment.
“Best of all, are we really surprised by the slowdown in hiring pace given all the macro challenges we’ve been hearing, and the tariff costs, confusion and volatility of their uses are not helpful?” wrote Peter Boockvar, chief investment officer of Bleakley Financial Group, in a blog post. “Just putting yourself on the shoes of your employer, we can understand the hesitation that so many businessmen have, especially small businesses that don’t have the flexibility that big companies have to adjust and have no financial position.”
NFIB executive director Holly Wade said that given their increased sensitivity to labor costs, many small business owners are proposing to fill positions.
“Having them keep their payroll is an important part of their spending, with profit margins more sensitive than their larger peers,” she told CBS MoneyWatch. “They certainly want to do everything possible to absorb these higher costs, and one way is in the labor side.”
This week, according to data from Payroll Processor ADP, many small businesses in the United States have not only canceled plans to develop their workforce, but also laid off employees.
Institutions with fewer than 50 employees lost 13,000 jobs in May, according to a report on ADP National Employment, an independent measure of employment changes in private companies.
Rothman's owner Ken Giddon, a men's clothing store with three locations across New York, said many of the company's plans and plans were "shelfed" because the tariffs eliminate optimism from business owners like him.
At Rothman's, that means adding two workers to the company's employees of about 30 people mentioned above. "We might be adding one or two people this year, and now we don't have one. The tariffs throw a whole wrench on things. They take the optimism away, they stripped the certainty."
Nikki Bravo, owner of Momentum Coffee, said at a small coffee shop in Chicago that she was hesitant to bring new workers. Bravo employs 12 employees at five locations, a number that typically expands over 20 in the summer, she said. In addition to hiring experienced workers, Bravo generally likes to offer opportunities for those who have difficulty finding a job, either because they are inexperienced or for other reasons. However, she had to back down.
“When you have financial uncertainty, we need to have more certainty,” she told CBS MoneyWatch. “So, I have to choose people with more experience. I can’t take risks with people who are unproven, which is unfortunate because part of us is giving back and working with the community.”
This year, Bravo plans to hire about eight workers to accommodate the summer crowd, and over the past few years, she will increase by 13. However, given how high her other expenses are, it is currently unaffordable. Including coffee and packaging materials have risen.
"It's coffee, so we can't postpone it to customers because they'll just spend a lot of money," Bravo told CBS MoneyWatch. "So we have to look at other ways to reduce costs and stay stable."