Hiring Freeze Breaks New Record: 63% of SMB Employers Halt Hiring, 10% Start Layoffs

TREND TRACKER | DATA INSIGHTS | HIRING REPORT -- Boston, MA, September 7, 2022: Based on the latest data from U.S. small businesses (SMBs), the demand for labor has declined again, with nearly two out of every three (63%) putting their hiring on hold because they can't afford to add staff, and 10% of that group is laying off workers. 

This decline is quite significant, as it's 18% higher than it was in July (at just 45%). Beyond that, the percentage reducing their staff jumped 6% to 10% this month from just 4% in July.

These are two key findings from Alignable's September Hiring Report, released today. These insights are based on a poll of 5,618 small business employers from Aug. 13, 2022, through Sept. 6, 2022.

Issue Is Deeper In The U.S., But Rising In Canada, Too 

Some 59% of Canadian small business owners say they're not hiring now (up 8% from July). But this is four percentage points lower than the U.S. rate of hiring freezes at the moment.

And, in Canada, only 4% are laying off employees, down from 8% in July. So, the overall situation is better in Canada than in the U.S. this month, but not by much -- and those figures are still quite high. 

Reasons for the drop in hiring among small business owners in both the U.S. and Canada revolve around cumulative inflation struggles, including astronomical labor costs, increasing rent, and higher-than-usual supply and energy expenses.

Other factors include months-long searches for labor that resulted in very few hires (if any), high turnover rates, being forced to reduce their hours or close locations, and a decrease in consumer spending. 

While some small business owners admit they just gave up on hiring more staff, the majority note that it's just too expensive to do it in this economic environment.

High Labor Costs + Decreasing Revenue = Hiring Freezes

Examining labor costs alone, 58% of poll participants said labor costs are at least 50% higher than they were prior to COVID. Of those employers:

• 29% say payroll costs have at least doubled
• 7% say they've tripled and, 
• 6% told us they were four times higher. 

Beyond the skyrocketing price of labor, only 23% of small business owners say they have fully recovered financially from the worst years of COVID, down 2% from July and down 20% from December 2021. This 23% recovery rate is the lowest the Alignable Research Center has seen in more than a year.  

Looking only at August revenue, 51% of all small businesses generated half or less of their pre-COVID monthly earnings, up 13% from 38% in July. 

With labor costs and other expenses climbing, and revenue dropping, this double-whammy effect is forcing many small businesses to hold off on hiring, while 10% are laying off their staff to stay afloat.

How Many Were Hiring Earlier In 2022, But Stopped? 

Beyond asking small business employers about their current hiring plans, we inquired about their hiring habits earlier this year. 

Nearly half (49%) of those in a hiring freeze now said they were hiring earlier this year, but shifted gears due to economic factors, including general inflation, labor costs, and fears of a recession.

And that figure was up 5% from July, when it was just 44%. 

We will need to watch carefully to see if hiring trends up again as small businesses prepare for Q4, perhaps hiring temporary, part-time seasonal workers.

Only 30% Of Women-Owned Employers Are Hiring Now

Evaluating which demographic groups are scaling back their hiring the most, women-owned businesses rose to the top in this most recent poll with 70% saying they're hitting the skids on hiring. And that figure jumped 19 percentage points from July.

However, as you can see in the charts below, all of the demographic groups saw an increase in the number of businesses deciding to halt their recruiting and hiring process.

The other group seeing a 19% increase are the nonminority-owned businesses, with 64% now saying they won't hire, up from 45% in July. Minority-owned businesses are in the same boat with 63% refraining from hiring now, up 5% from July. 

Finally, 47% of veteran-owned businesses report they're not recruiting or hiring right now, up from 40%.

Real Estate, Automotive, Healthcare & Retail Reduce Hiring

Moving from demographics to key industries, Alignable's September Labor Poll found that most sectors are cutting back on hiring compared to July. 

The only two that showed an increase in the percentage of SMBs seeking new hires were gyms (now with only 58% instituting hiring freezes compared to 64% in July), and trucking companies, limo services, and Lyft/Uber drivers. 

This month, only 50% of those in transportation are putting on hold on hiring, down 8% from 58% in July. 

While those are notable decreases in the overall trend around hiring freezes, it's important to point out that both figures remain high. We'll be watching closely in the coming months to see if these statistics continue to improve.

However, the rest of the industries represented here showed increases in the percentage of small businesses refraining from hiring in September and a lift in staff layoffs, too.

Topping the list are all of the owners of real estate practices across North America. Now, 69% of them are no longer hiring, up 6% from July. And 12% are laying people off. 

Rising Interest Rates = A Big Hurdle For Real Estate

Much of this activity in real estate is due to rising interest rates, reduced inventory, and construction companies putting big projects on pause (or canceling them altogether, fearing that a recession will prevent consumers from buying new homes).

So, it's no surprise to see that 60% of small construction firms have instituted a hiring freeze, up a staggering 18% from July. 

Similar to those in real estate, 12% of small business owners in construction have plans to start reducing headcount in their firms. 

With fewer projects and increased trucking fees and supply costs, there's just not as much money coming in to cover those new hires -- or some of the people they're currently employing.

Retailers, Restaurants, & Salons: Reversal of Labor Issues

For much of the past year, retailers, restaurants, and beauty salons sat atop lists of industries struggling the most to find qualified workers who wanted to fill their job openings.

And while some are still having trouble sourcing their staffers, many have put a hold on hiring due to economic hardships. 

Sixty-four percent of small retailers said they couldn't afford to hire workers, at least not now (up 7% from July). The same goes for 56% of beauty salon owners (up 22% from 34% in July), and 55% of restaurateurs (up 17% from just 38% last month). 

Among retailers, 14% are starting to let their workers go, along with 9% in the restaurant industry, and 11% of beauty salon owners. 

It's hard to imagine after struggling for so long to find help that these particular SMBs are now forced to cut workers loose, but that shows just how devastating the economy has been for these small businesses so far this year. 

It's our hope that these figures reverse again as these operations start to hire part-timers to handle holiday shopping surges, an increasing number of celebratory dinners out, and a boost in hair styling before big galas or even in preparation for holiday card family photos. 

But we'll see what transpires -- as this year has been full of twists, turns, and surprises when it comes to the labor market. 

What's Happening With Hiring In The States & Provinces?

If you thought some of the hiring freeze figures were daunting examining key industries, take a gander at these brow-raising state statistics. 

Below, please find a summary of the findings looking at both states and provinces. Let's start with some of the states experiencing the deepest hiring freezes and layoffs. 

The top three in September, so far, are:

• New York: 75% of its SMBs are halting hiring, and 7% of that group is starting to lay off staffers (up 34% for hiring freezes compared to July). 
• Ohio: 74% of small business owners in Ohio say they can't afford to make new hires right now, and 7% are reducing their workforce (up 27% in terms of hiring, and up 3% for layoffs compared to July). 
  
• Pennsylvania: 68% of PA-based SMB owners aren't looking for help now, and 7% of this group is also letting workers go (up 20% for hiring freezes, up 5% for layoffs compared to July).

Florida and Illinois SMBs have the highest layoff rates in the country at 12% and 11%, respectively, with 61% of Floridian small business owners and 60% of Illinois-based SMB owners telling us they're not hiring now. 

Compared to July, Florida's hiring freeze percentage is actually 2% lower in September, but 7% more small businesses are laying off employees now than they were in July. 

The percentage of Illinois-based SMBs refraining from hiring in September is the same as it was in July, but the number conducting layoffs now is up by three percentage points from 8% two months ago.

Looking at a few other states, the rate of Texan small businesses holding back on hiring is up 10% from July, along with 6% more reducing their staffing.

California's At 60% & Colorado Is On The Lower End: 44%

It's a similar story in California, where 11% more SMBs are not hiring now compared to July, and 7% more are reducing headcount at their firms. 

And at the other end of the list, we have Colorado, with 44% of SMBs saying they have stopped hiring, and 10% are looking at layoffs. 

So, CO-based companies are 19% less likely to have hiring freezes compared to the national average -- a significant percentage. 

But, Colorado's SMBs are matching the same rate of layoffs as their peers nationally -- with 10% laying off workers. That shows some economic volatility, for sure.

Though CO-based business owners are on the low end for hiring freezes on this chart, other stats continue to paint a picture of economic uncertainty.

Some 66% of them say we're in a recession for sure with 28% adding it feels more like a "Depression." 

And they're 9% more pessimistic about the economy than the average U.S. SMB, as 57% of them think we're in a recession.

Looking at the overall recovery rate of CO-based small businesses vs. those nationally, SMBs in Colorado are doing just a bit better than the national average, but that's still not great. 

For CO-based businesses, 28% said they are fully recovered, making the same or more monthly income compared to the time prior to COVID. Nationally, that percentage is just 23%.

Majority Of Canadians Aren't Hiring

Shifting gears to Canada, AB-based small businesses take the lead in terms of putting the brakes on hiring in September, with 69% saying they're not expanding the number of employees. In fact, 5% are even laying workers off. 

Next up, 58% of BC-based small businesses aren't hiring now, while 4% of that group is letting people go. 

And finally, 51% of Ontario's small business owners aren't hiring right now and 6% are starting layoffs. 

To see other specific data from Alignable's September Labor Poll related to additional industries, states, or provinces, please contact me at chuck@alignable.com. 

To review past poll results, go to the Alignable Research Center. 

About The Alignable Research Center

Alignable is the largest online referral network for small businesses with 7 million+ members across North America. 

We established our research center in early March 2020, to track and report the impact of the Coronavirus on small businesses, and to monitor recovery efforts, informing the media, policymakers, and our members.