In September, 32% (seasonally adjusted) of all owners reported job openings they could not fill in the current period, unchanged from August. The last time unfilled job openings fell below 32% was in July 2020. Twenty-eight percent had openings for skilled workers (unchanged), and 13% had openings for unskilled labor (unchanged). While openings are trending down, they remain above the historical average as owners struggle to fill openings. A seasonally adjusted net 16% of owners plan to create new jobs in the next three months, up 1 point from August and the fourth consecutive monthly increase. Hiring plans are at their highest level since January. Overall, 58% reported hiring or trying to hire in September, up 5 points from August. Fifty percent (88% of those hiring or trying to hire) of owners reported few or no qualified applicants for the positions they were trying to fill (up 7 points). Twenty-nine percent of owners reported few qualified applicants for their open positions (up 3 points), and 21% reported none (up 4 points). In September, 18% of small business owners cited labor quality as their single most important problem, down 3 points from August and tying with taxes as the top single most important problem. Labor costs reported as the single most important problem for business owners rose by 3 points from August to 11%.

Fifty-six percent of small business owners reported capital outlays in the last six months, unchanged from August. Of those making expenditures, 42% reported spending on new equipment (up 5 points), 22% acquired vehicles (unchanged), and 14% improved or expanded facilities (down 3 points). Eleven percent spent money on new fixtures and furniture (down 2 points), and 5% acquired new buildings or land for expansion (unchanged). Twenty-one percent (seasonally adjusted) plan capital outlays in the next six months, unchanged from August and a historically weak reading. Hopefully, the new expensing rules and less restrictive monetary policy will stimulate spending

In September, both actual and planned price increases rose from the previous month. The net percent of owners raising average selling prices rose 3 points from August to a net 24% (seasonally adjusted). Price increases remain above the monthly average of a net 13%, suggesting continued inflationary pressure. Fourteen percent of owners reported that inflation was their single most important problem in operating their business (higher input costs), up 3 points from August. Unadjusted, 33% reported higher average prices (unchanged), and 10% reported lower average selling prices (down 3 points). Looking forward to the next three months, a net 31% (seasonally adjusted) plan to increase prices (up 5 points from August), perhaps in anticipation of rising tariff costs that will be passed on to consumers.

A net 7% reported their last loan was harder to get than in previous attempts, up 4 points from August and the highest reading of the year. In September, a net 7% of owners reported paying a higher interest rate on their most recent loan, up 1 point from August. The average rate paid on short maturity loans was 8.8% in September, up 0.7 points from August. Twenty-six percent of all owners reported borrowing on a regular basis, up 3 points from August.

Seasonally adjusted, a net 31% reported raising compensation, up 2 points from August. A seasonally adjusted net 19% plan to raise compensation in the next three months, down 1 point from August. The frequency of reports of positive profit trends improved 3 points from August to a net -16% (seasonally adjusted). September’s reading was the highest (least negative) since December 2021. Among owners reporting lower profits, 33% blamed weaker sales, 17% cited the rise in the cost of materials, 10% cited price change for their product(s) or service(s), and 9% cited labor costs. Among owners reporting higher profits, 58% cited sales volume, 21% cited usual seasonal change, and 6% cited higher selling prices.

A net -7% of all owners (seasonally adjusted) reported higher nominal sales in the past three months, up 2 points from August, as more firms reported declining sales than reported gains. The net percent of owners expecting higher real sales volumes fell 4 points from August to a net 8% (seasonally adjusted). The net percent of owners reporting inventory gains rose 3 points to a net -3% (seasonally adjusted). Not seasonally adjusted, 10% reported increases in stocks (unchanged), and 12% reported reductions (down 2 points). A net -7% (seasonally adjusted) of owners viewed current inventory stocks as “too low” in September, down 7 points from August. This was the largest monthly decline in the survey’s history. The suddenly high percentage of respondents seeing their current stock as too high is a worrying sign that likely reflects increased concerns about slow sales. A net 1% (seasonally adjusted) of owners plan inventory investment in the coming months, unchanged from August. In September, 64% of small business owners reported that supply chain disruptions were affecting their business to some degree, up 10 points from August. Largely, this increase reflected milder impacts, as five percent reported a significant impact (up 2 points), 18% reported a moderate impact (up 3 points), 41% reported a mild impact (up 5 points), and 35% reported no impact (down 9 points).

In September, overall business health was generally unchanged. When
asked to rate the overall health of their business, 11% reported it as
excellent (down 3 points), and 57% reported it as good (up 3 points).
Twenty-seven percent reported the health of their business as fair
(unchanged), and 4% reported it as poor (unchanged). The net percent
of owners expecting better business conditions fell 11 points from
August to a net 23% (seasonally adjusted). In September, 11%
(seasonally adjusted) reported that it is a good time to expand their
business, down 3 points from August. Compared to readings during
economic expansions, this is a relatively weak reading.

In September, the percent of small business owners reporting labor quality as the single most important problem for their business fell 3 points to 18%, tying with taxes as the top problem. Labor costs reported as the single most important problem for business owners rose 3 points from August to 11%. Eighteen percent of small business owners reported taxes as their single most important problem, up 1 point from August and ranking as the top problem alongside labor quality. The percent of small business owners reporting government regulations and red tape as their single most important problem fell 3 points to 6%. Fourteen percent of owners reported that inflation was their single most important problem in operating their business, up 3 points from August. The percent of small business owners reporting poor sales as their top business problem remained at 10%. In September, 8% reported the cost or availability of insurance as their single most important problem, down 1 point from August. Four percent reported that financing and interest rates was their top business problem in September, unchanged from August. Five percent reported competition from large businesses as their single most important problem, unchanged from August.

Overview

Whatever impact the government shutdown has on small businesses, it will show up in the October survey. Questionnaires were mailed out on October 1. Reports of GDP growth are solid and the unemployment rate remains relatively low. However, actual job growth is weak and consumers continue to report declining confidence. Solid consumption spending appears to be from the top third of the income distribution and the stock market keeps setting new record highs, producing capital gains income for shareholders. It is an open question how long this runup can last, as share prices are already historically very high relative to company earnings, the primary basis for valuations.

At the beginning of the year, optimism was at a historically high level (102.8). Now the Index is at 98.8, just above the 52-year average. Growth in the economy is solid though driven perhaps more by AIrelated investments than by spending that impacts Main Street firms, and housing is still depressed. Uncertainty is very high, the Administration has a lot of policy changes still in the air, lots of moving parts. How it all comes together is yet to be revealed.

Quotes from NFIB Members

“High beef prices create uncertainty on affordability, which also creates uncertainty on the processing service we offer. Overall, customers in our surrounding area have seemed fairly uncertain.” – Retail (meats), MN

“We are seeing more potential clients choosing to delay or forego repairs or improvements due to lack of confidence in the overall economy, especially in regards to concerns over job stability – they don’t know if their jobs will still be around in six months. Other businesses have such trouble finding and keeping employees that they feel forced to begin automating significant processes rather than close down. Area businesses that provide in-store customer assistance cannot seem to be able to find or train people with a minimum of skills… Our business is making a slow transition away from larger projects and long-distance job sites so that we can keep what remains of our already reduced workforce.” – Art & Consulting, IN

“The continued increases in the minimum wage have placed significant strain on our business, making it increasingly difficult to operate sustainably. At this time, we are experiencing challenges in finding and retaining reliable employees… In addition, the rising cost of products forces us to raise our own prices. This not only reduces our margins but also creates frustration among customers, making it more difficult to maintain strong client relationships. Taken together, these factors are creating a very challenging environment for our company and our ability to serve our customers effectively.” – Vending, FL

“With the government being all over the place, and businesses closing as fast as some open, nothing is certain, [and] construction has almost come to a halt.” – Construction (painting), FL

“Health insurance and taxes, especially property taxes are killing us.” – Services (auto body shop), IL