Small businesses are losing ground in the hiring game as inflation remains high;

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Head counts at companies with fewer than 50 employees declined in three of the past four months, according to ADP payroll data.

Owners of many small companies say inflation has added to the pressures of an already tight job market, making it increasingly difficult to keep pace with the wages and benefits offered by large employers.

The hiring challenges are stunting growth, small-business owners say, and further clouding their deteriorating economic outlook.

At Gahlsdorf Logging Inc., the head count is stuck at around 20, making it difficult for the Rickreall, Ore., logging contractor to keep its eight-person crews fully staffed.

Owner Jim Gahlsdorf said he turns down an offer about once a month to look at or bid on a potential job because he doesn’t have the workers.

Some small logging operators have dropped to one crew from two in response to labor shortages. Mr. Gahlsdorf said he worries that a slimmed-down operation wouldn’t produce enough revenue to cover overhead.

He is hoping that as the number of crews operated by competitors declines, customers will pay more for his services, allowing him to pay his workers more.

Sixty-three percent of small-business owners say that hiring challenges are affecting their ability to operate at full capacity, according to a June survey of more than 825 small businesses for The Wall Street Journal by Vistage Worldwide Inc., a business coaching and peer advisory firm.

Some large companies that saw significant growth during the Covid-19 pandemic are beginning to take a more cautious approach to hiring, which could over time create more opportunities for smaller employers to bolster their ranks. For now, however, “small firms are still playing catch up,” ADP chief economist Nela Richardson said. If the economy weakens, small firms are also likely to change their hiring plans, she then added.

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