Layoffs & Hiring Freezes Surge: 15% of SMB Employers Reduce Staff (Up 7%) & 74% Halt Hiring (up 12%)

DATA INSIGHTS | HIRING REPORT | Boston, MA, December 9, 2022: Large corporations aren't the only businesses seeing an increase in layoffs right now. 

Due to fears of recession, reduced revenues, and ongoing struggles with high inflation and labor costs, there's now a surge in layoffs among small businesses, too, along with a significant jump in the percentage instituting hiring freezes. 

The percentage of small business employers now laying off staffers has nearly doubled in one month's time, going from 8% in November to 15% in December. 

Beyond that, nearly three out of four small business employers (74%) say they can't afford to hire anyone now, and don't expect to hire again until at least Q2 2023. That finding is up 12 percentage points over last month's number: 62%. 

The current economic landscape is fueling these surges. Three more statistics illustrate the challenge: 

• Only 14% of small businesses open prior to COVID have fully recovered, making as much if not more monthly than they generated prior to the pandemic. 
• This is down 10 percentage points from 24% in October, which was already low. Even worse, the recovery rate is down 29 percentage points from Dec. 2021, when it hit a high of 43%.
• 61% of all small business owners tell us inflation continues to have a "very negative impact"on their financial well-being.

All of these data insights are part of Alignable's December Hiring Report, released today. It's based on the sentiments expressed by 6,908 randomly selected small business owners, polled from November 19, 2022 through December 8, 2022. And it includes another 100,000+ historical responses from surveys conducted over the past two years.

Some 87% of employers participating in this poll have fewer than 20 employees, and 77% have 10 or less, representing the true heart of small business -- diligent, dedicated Mom & Pop operations across the United States and Canada. 

Canadians & U.S. SMBs Are In The Same Boat

In fact, the rates of hiring freezes and layoffs are the same among Canadian small business employers as they are in the U.S. right now -- 74% and 15%, respectively.  

This chart shows how similar these trends are across North America. Many businesses are scaling back hiring based on economic conditions. 

Now let's look more closely at the industries where layoffs are more prominent.  The chart below drills down into the latest data.

• Gyms lead the pack with 19% of their owners saying they're laying off workers, up 17% from just a month ago. Demand is down, rents and other maintenance costs are up, and the gym owners need to keep the business going.
• Some 18% of small construction companies (up 6% from November) and 17% of real estate firms (up 9% from last month) are feeling compelled to let staffers go, as their revenues are dropping and expenses for materials (lumber, metal, etc.) and trucking costs continue to cut into margins. However, increasing interest rates are causing the greatest concerns among realtors, as these higher rates result in declining housing markets.
• Tied with real estate, 17% of employers in the transportation industry (up 13%) are laying off workers, citing the ongoing high costs of gas and labor, as well as expenses replacing and fixing vehicles. This category includes taxi and limo services, as well as trucking companies.
• The automotive industry also saw a big jump in the percentage of SMBs letting employees go -- 12% this month, up nine percentage points from November. 
• And one statistic here really gave us pause -- 15% of those in finance, who usually find a way to generate strong revenues, are pulling back and letting staff go. When the SMB owners plugged into investing, accounting, taxes and all things financial start cutting back, it's one sure sign they're worried about a recession coming. (Many mentioned that in poll comments, as well.) That statistic is up six percentage points from just last month. Hopefully, they'll staff up again once tax season kicks into full gear, but we'll see.

What About Retailers, Restaurants & Beauty Salons?

This time last year, many of these small business employers were desperate to find qualified workers to help them generate revenue and keep their doors open as often as possible. 

But since then, some have reduced hours to reflect the dwindling staffers they have, and others say they've given up on filling some of the open positions as "no one wants to apply, yet alone work," as one retailer said, echoing thousands of others. 

And more than 70% of all SMBs polled say labor costs are significantly higher than they were before COVID, with 19% saying they're more than 25% higher. Translation: they're just not affordable for several small businesses.

As part of this report, we also asked retailers how Q4 2022 is going for them, financially.  Their responses help explain why 14% are laying off staffers, up 13 percentage points from November. Here's a quick look:

• Only 11% of retailers said Q4 2022 has helped them rebound or has otherwise reflected a major increase in revenue.  
• By year's end, 40% said they expect Q4 2022 will yield less revenue than they generated this time last year. One percent of that group has already decided to shut down for good. 
• Another 9% predict Q4 might also be the "end of the line for them," as they contemplate closing their business.
• Finally, the remaining 40% say sales have been "disappointing," but they're still hoping for a last-minute surge in revenue before December 31st.

One retail employer summed up the situation in this poll comment:

Labor costs are exceeding revenue. I've held off for a while, but now I need to start laying people off. I can't afford to shut down the business.

Restaurant and beauty salon owners are echoing these sentiments and trends, as 11% in the food & beverage sector and 6% at salons are now laying off workers, representing a five percentage point increase from November for both industries. 

Which Sectors Aren't Laying Off As Many Workers?

Despite many disappointing findings, there are some silver linings in this report and they can be found looking at manufacturing and travel, the two industries ranking lowest in terms of layoffs. 

Only 4% of manufacturers told us they're laying off employees and they're also at the bottom of the list of industries implementing hiring freezes -- with only 34% stopping their hiring, down one percentage point from last month, and down 11 percentage points from October. 

Compared to the national average of 74%, manufacturers are 40 percentage points lower than that, which is very impressive. 

The other industry with a very low rate of layoffs is travel.

Only 1% of pros running travel agencies and related businesses are laying off workers right now, down 12 percentage points from 13% in November. 

While 61% of those in travel are holding off on hiring right now, that's likely a prudent move as they continue to recover from more than two years of being held back by the many waves of COVID that curtailed travel.  

On a side note, travel was the industry that stood out in last month's November Rent Report, as only 13% of those SMBs couldn't pay their rent in full and on time, down from 34% in October. 

We're hoping travel -- and manufacturing -- continue to bounce back, since most other industries continue to show more signs of suffering under the weight of more than a year of much higher than usual inflation. 

Hiring Freezes Escalate Along With Layoffs

Looking at the charts below, you can see a summary of our poll findings, when we asked about the status of hiring freezes, which have been a big part of Alignable's Labor Reports over the past several months. 

In keeping with the increase in layoffs, we're also seeing that many industries are pulling back on hiring permanent, full-time staffers.  The reasons include high labor costs, reduced monthly revenue, and more acute fears of a recession in 2023.

The Majority Of SMBs In These Sectors Aren't Hiring

These numbers are very high by all standards and most of the increases over November are dramatic, as well.  As we saw with the layoffs, many small businesses are cutting back and bracing themselves for greater economic slowdowns. 

• 82% of real estate firms aren't hiring (up 12% from November), and 74% in construction (up 16%) are following suit, due to rising interest rates, as noted earlier
• 79% of SMB owners in finance are putting the brakes on hiring, (up 17%)
• 75% of gym owners (up 2% from an already high rate of 73% in November)
• 72% in retail (up 12%), for the many reasons listed earlier in this report
• 65% in the automotive sector (up 3%)
• 65% of beauty salons and barber shops (up 12%)
• 65% in transportation (the same high rate as in November), and 
• 56% of restaurateurs (up 3% from last month and up 11% from October).

One poll comment summed up the emotion of many of the small business employers taking this survey: 

"I'm not hiring employees until I see the economy trending toward recovery. I'd love to hire, but the market is too unpredictable now."

Before we wrap up this section, we want to address the situation small businesses in the agricultural sector are facing. 

Several tell us 2022 has been a very difficult year, so it's not a surprise to see them tie with real estate at the top of this list with 82% saying they can't afford to hire anyone until at least Q2 2023. 

Suffering from months of drought in their prime growing season, plus increased trucking expenses, 27% more small businesses in the agriculture space decided to stop hiring in December, adding to their already high rate of 55%.  

Since most of them aren't hiring (and 17% of that group are laying off workers), it's abundantly clear that many of these companies are just trying to regroup and reassess their resources, as they plan rebounding strategies for next spring.

Moving away from the industry deep dive, we found a few other interesting trends looking at layoffs and hiring freezes across select states and provinces. While there was some variation, rates were high across most regions.

Hot Spots Found In CO, MI, TX, CA, NC, & OH

Looking at the chart below, the Top Seven States For SMB Layoffs are:

• Colorado (21% of SMBs plan to let workers go, up 14% from November)
• Michigan (20%, up 19% from last month)
• Texas (17% in Dec., up 1% from a whopping 16% in November)
• California (16% in Dec. holding steady from last month)
• North Carolina (16%, up 15% from 1%)
• Ohio (12% in Dec., up 3% from 9%)
• Illinois (11% in Dec., up 8%)

Rates are still high in Massachusetts (10%), New York (10%, up 5%), and Pennsylvania (8%, up 7%). But they taper off in Florida (3%, down 4%), and New Jersey (1%, down 2%), where some improvement in layoff numbers is seen.

That said, we should continue to look at where these trends go in January and February.

These States Say "No" To Hiring Until Q2 2023

And here's a brief look at the states where most SMB hiring is halted right now. 

• Illinois tops this list at 82%, up 28% over November, indicating how much small businesses are slamming on the brakes when it comes to hiring in that state.
• Again, Michigan and Colorado, are way up there, too, at 80% and 79%, respectively. They also saw major increases of 14% and 24% over November's figures. 
• California (76%) and Texas (75%) also had significant jumps in just one month, up 16% in California and 12% in Texas. 
• New York is at 67%, which is a high rate, too. But what's most alarming here is the 19% escalation from November, indicating very cautious behavior on the part of small business employers there.

On a positive note, Ohio's small business employers saw a reduction in local hiring freezes by 12 percentage points. Let's hope that continues into the new year. 

What's Happening In Canada?  

As we mentioned above, 15% of small business employers in Canada are laying off workers and 74% are halting hiring, matching the rates in the U.S. 

But there is some variation in the provinces with small business owners who respond most to our surveys. Ontario is in the lead when it comes to the percentage of small businesses laying off workers right now, with a big jump of 14% from last month. 

In terms of hiring freezes, Alberta leads with 78% of its small business employers saying they're not in the financial position to hire more help, at least until Q2 2023. And the 17% increase over November here is notable, as well, since it's the highest spike among the provinces over the past month. 

To see more specific data from Alignable's December Hiring Report 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 7.5 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.