In October, 35 percent (seasonally adjusted) of all owners reported job openings they could not fill in the current period, up 1 point from September’s lowest reading since January 2021. Thirty-one percent have openings for skilled workers (up 1 point) and 14 percent have openings for unskilled labor (unchanged). The difficulty in filling open positions is particularly acute in the construction, transportation, and wholesale sectors. Job openings in construction were down 4 points from last month with 49 percent having a job opening they can’t fill. Openings were the lowest in the agriculture and finance sectors. A seasonally adjusted net 15 percent of owners plan to create new jobs in the next three months, unchanged from September. Overall, 53 percent reported hiring or trying to hire in October, down 6 points from September. Forty-six percent (87 percent of those hiring or trying to hire) of owners reported few or no qualified applicants for the positions they were trying to fill (down 6 points). Twenty-five percent of owners reported few qualified applicants for their open positions (down 5 points) and 21 percent reported none (down 1 point). Reports of labor quality as the single most important problem for business owners rose 3 points from September to 20 percent. Labor cost reported as the single most important problem for business owners fell 1 point to 8 percent, 5 points below the highest reading of 13 percent reached in December 2021.

Fifty-four percent reported capital outlays in the last six months, up 3 points from September. Of those making expenditures, 35 percent reported spending on new equipment (unchanged), 23 percent acquired vehicles (unchanged), and 14 percent improved or expanded facilities (down 1 point). Eleven percent spent money on new fixtures and furniture (up 1 point) and 5 percent acquired new buildings or land for expansion (up 1 point). Twenty-two percent (seasonally adjusted) plan capital outlays in the next six months, up 3 points from September. The Uncertainty Index rose again, to 110, the highest reading recorded. Uncertainty always results in curtailment of hiring and capital spending.

The net percent of owners raising average selling prices fell 1 point from September to a net 21 percent seasonally adjusted. Twenty-three percent of owners reported that inflation was their single most important problem in operating their business (higher input and labor costs), unchanged from September and remaining the top issue. Unadjusted, 13 percent (unchanged) reported lower average selling prices and 32 percent (down 2 points) reported higher average prices. Price hikes were most frequent in the finance (53 percent higher, 9 percent lower), retail (38 percent higher, 11 percent lower), construction (35 percent higher, 9 percent lower), and services (35 percent higher, 13 percent lower) sectors. Seasonally adjusted, a net 26 percent plan price hikes in October (up 1 point).

Two percent of owners reported that all their borrowing needs were not satisfied, unchanged from September. Twenty-three percent reported all credit needs met (down 1 point) and 64 percent said they were not interested in a loan (up 2 points). A net 6 percent reported their last loan was harder to get than in previous attempts (down 2 points). Three percent reported that financing was their top business problem in October (down 1 point). A net 5 percent of owners reported paying a higher rate on their most recent loan, down 7 points from September and the lowest reading since January 2022. The average rate paid on short maturity loans was 9.7 percent, down 0.4 of a point from September’s highest reading since February 2001. Twenty-five percent of all owners reported borrowing on a regular basis, down 1 point from September.

Seasonally adjusted, a net 31 percent reported raising compensation, down 1 point from September. The last time it was this low was April 2021, although this is still a historically strong reading. A seasonally adjusted net 23 percent plan to raise compensation in the next three months, unchanged from September. The frequency of reports of positive profit trends was a net negative 33 percent (seasonally adjusted), up 1 point from September. Among owners reporting lower profits, 39 percent blamed weaker sales, 16 percent blamed the rise in the cost of materials, 12 percent cited labor costs, and 7 percent cited lower selling prices. For owners reporting higher profits, 51 percent credited sales volumes, 13 percent cited usual seasonal change, and 13 percent cited higher selling prices.

A net negative 20 percent of all owners (seasonally adjusted) reported higher nominal sales in the past three months, down 3 points from September and the lowest reading since July 2020. The net percent of owners expecting higher real sales volumes rose 5 points to a net negative 4 percent (seasonally adjusted), the highest reading of this year. The net percent of owners reporting inventory gains rose 4 points to a net negative 9 percent (seasonally adjusted). Not seasonally adjusted, 10 percent reported increases in stocks (unchanged) and 18 percent reported reductions (down 4 points). A net negative 2 percent (seasonally adjusted) of owners viewed current inventory stocks as “too low” in October, up 2 points from September. A net negative 2 percent (seasonally adjusted) of owners plan inventory investment in the coming months, up 1 point from September.

The NFIB Uncertainty Index reached a new 51 year high reading at 110, a new level of “hand wringing” for small business owners. To six questions in the Index, a record high number of owners said “I don’t know,” they couldn’t say better or worse, higher or lower, up or down, couldn’t pick a direction. This signals that “decisionmakers” are paralyzed by uncertainty in anticipation of the election.

With the election over, much of their uncertainty will be resolved as the new Administration reveals their new management team and policy priorities. As detailed policies are revealed, owners will have more certainty about what might happen to taxes and regulations in 2025.

The economy looks okay at the overview level, but the details are a bit worrisome. Most troublesome is the role of government spending, supported by $2 trillion in government borrowing (at historically high interest costs). Government spending rose almost twice as fast as consumer spending and government employment has dominated the employment statistics, directly and indirectly. The economy cannot continue to finance its growth by borrowing more money.

Still to be revealed is the impact of the election on owner optimism and on investment spending. Labor demand has been elevated for some time and is likely to persist absent a significant decline in private sector spending. The Fed will continue to cut its policy rate hoping to insure a soft landing.