Small business owners across the United States found it even harder to fill open positions in October, according to a new survey from the National Federation of Independent Business (NFIB). The share of owners reporting job openings they couldn't staff rose to 36%, up from 32% in September.
The monthly NFIB jobs report is closely watched as a gauge of labor demand on "Main Street," the millions of small firms that employ nearly half of the private workforce. When these businesses struggle to hire, it can ripple through local economies and the broader labor market.
What the survey found
The NFIB survey showed that 56% of owners were hiring or trying to hire in October. Of those, a striking 86% said they saw few or no qualified applicants for the positions they were trying to fill.
With the applicant pool thin, many owners turned to the most direct tool available: higher pay. A seasonally adjusted net 29% of owners said they had raised compensation to attract workers, up from the previous month. Looking ahead, a net 24% said they planned to increase pay in the next few months.
The numbers point to a labor market that remains tight for small businesses, even as the broader economy shows signs of cooling. The NFIB's findings echo other recent data, including ADP's report that private hiring beat forecasts in October while pay growth stayed firm.
Why small business hiring matters
Small businesses are often more sensitive to labor costs than large corporations. They have less flexibility to absorb wage increases or to offer perks like stock options and generous benefits. When they are forced to pay more to hire, they may pass those costs on to customers through higher prices, or they may trim other expenses.
The persistent difficulty in finding qualified workers also suggests that the labor market is not as loose as some headline unemployment numbers might imply. Even with the unemployment rate low, many workers may be staying in their current jobs, or the skills available may not match what employers need.
This dynamic is part of a broader picture of sticky price pressures in the services sector, where labor costs are a major input. If small businesses keep raising pay, it could feed into inflation, which is why the Federal Reserve watches wage data closely.
What it means for investors
For everyday investors, the NFIB survey is a useful signal about the health of the consumer economy and the path of interest rates.
When small businesses are hiring and raising pay, it suggests consumer spending is likely to remain supported, which is good for corporate earnings. But it also means the Fed may see less urgency to cut interest rates, since a tight labor market can keep inflation elevated.
Investors have been watching for signs that the labor market is cooling enough to allow the Fed to ease policy. The NFIB data complicates that picture: while hiring is getting harder, the demand for workers is still there, and wages are still climbing.
That said, the survey also shows that small business owners are not exactly optimistic. The NFIB's broader optimism index has been below its historical average for some time, reflecting concerns about inflation, taxes, and regulation. The difficulty finding workers is just one more headache for owners who are already navigating a challenging environment.
For investors in small-cap stocks, this report is worth noting. Small companies often have less pricing power than large ones, so rising labor costs can squeeze their margins. The recent surge in small-cap stocks may be tested if wage pressures persist.
The road ahead
The NFIB survey is just one snapshot, but it aligns with other indicators showing a labor market that is gradually cooling but still tight. The October jobs report, due later this month, will provide a more comprehensive look at hiring across the economy.
For now, small business owners are left to compete for a limited pool of workers, often by raising pay. That may be good news for workers, but it keeps the pressure on business owners and on inflation. Investors will be watching to see whether this trend continues, and how the Fed responds.
