With nearly half (49%) of small businesses in the construction industry reported labor quality as their single most important problem in October—22 points higher than for all firms—NFIB also found that job creation appears to have stalled on Main Street, in large part because of a shortage of qualified workers.

“Optimism among small businesses declined slightly in October as owners report lower sales and reduced profits,” said NFIB Chief Economist Bill Dunkelberg. “Additionally, many firms are still navigating a labor shortage and want to hire but are having difficulty doing so, with labor quality being the top issue for Main Street.”

Given how much immigration policy has limited labor supply this year, one conclusion is that many illegal migrants have been outstanding employees. This would seem to be an especially good time to find a way to enforce the law without deporting nonviolent, productive people. Normally, a difficulty in finding qualified workers might be expected to motivate employers to raise compensation, but the NFIB economist notes:

• Labor costs reported as the single most important problem for business owners fell 3 points from September to 8%.
• In October, a seasonally adjusted net 26% reported raising compensation, down 5 points from September. A net 19% (seasonally adjusted) plan to raise compensation in the next three months, unchanged from September.

The downward trends in both metrics since their peaks in 2022 also speak to the calming labor market. NFIB found that small firms are also handing out fewer raises as they remain unimpressed with many current job applicants.

The post-Covid labor market appears to have mostly normalized on Main Street. Jobs are plentiful albeit declining…while qualified applicants are scarce but increasing for some industries. The average net gain in employment was essentially 0, with 14% cutting jobs and 11% adding workers, added NFIB’s Mr. Dunkelberg.

The Wall Street Journal recently reported that the declining wage pressure is good news for companies and consumers if it helps to finally slay the inflation beast. But it’s hard to be optimistic if employers are avoiding raises because they think workers haven’t earned them.

A seasonally adjusted net 15% of owners plan to create new jobs in the next three months, down 1 point from September. This marks the first decline since hiring plans started to increase in May 2025. Firms remain interested in hiring but find it difficult to fill openings.

Visit www.nfib.com for the full report.