Small businesses are facing a slowdown in employment activity, according to the monthly jobs report from the National Federation of Independent Business (NFIB). While job openings on Main Street are now at pre-pandemic levels, small business owners are still competing to retain and recruit employees. In fact, 37% of all small business owners reported job openings they could not fill, which is the lowest reading since January 2021.

Despite this slowdown in hiring, labor quality remains a major concern for small business owners. The percentage of small business owners identifying labor quality as their top operating problem increased by two points from February to 18%. Labor costs were identified as the most important problem for business owners, decreasing slightly to 10%, remaining three points below the highest reading of 13% in December 2021.

Looking ahead, small business owners are planning to raise compensation in the next three months. A net 21% plan to do so, an increase of two points from February. In addition, a net 38% of small business owners reported raising compensation in the past month, up three points from February.

The NFIB’s report also highlighted that skilled labor shortages remain a significant challenge for many small businesses. Thirty-one percent of owners have job openings for skilled workers, while only 14% have openings for unskilled labor. Job openings were highest in the transportation, construction, and services sectors