Worker Shortage Continues in a Declining Job Market
NFIB finds fewer small firms raising compensation.
By James Freeman
Nearly half of construction firms in the latest NFIB survey cite labor quality as their single most important problem. Mario Tama/Getty ImagesJob creation appears to have stalled on Main Street, in large part because of a shortage of qualified workers.
Yet small firms are also handing out fewer raises as they remain unimpressed with many current job applicants.
That’s according to the latest monthly employer survey from the National Federation of Independent Business, due out later today.
NFIB Chief Economist William Dunkelberg reports:
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.
Speaking of those unclaimed opportunities to work, NFIB notes:
In October, 32% (seasonally adjusted) of all owners reported job openings they could not fill in the current period, unchanged for the second consecutive month.
Before September that number had been higher in monthly readings going back to December 2020.
The picture continues to be one of a deteriorating but still fairly good market for those willing to work.
Mr. Dunkelberg reports:
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 finding it difficult to fill openings.
It seems that firms are seeing people apply for openings recently, but business operators are not very impressed with them.
NFIB reports:
In October, 27% of small business owners cited labor quality as their single most important problem, up 9 points from the previous month and the highest level since the record high of 29% in November 2021.
Labor quality reported as the single most important problem was the highest in the construction, transportation, and professional services industries, and lowest in finance and agriculture.
Nearly half (49%) of small businesses in the construction industry reported labor quality as their single most important problem, 22 points higher than for all firms.
Only 13% of businesses in the finance industry reported labor quality as their single most important problem.
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 of these metrics since their peaks in 2022 also speak to the calming labor market.
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.
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James Freeman is the co-author of “The Cost: Trump, China and American Revival” and also the co-author of “Borrowed Time: Two Centuries of Booms, Busts and Bailouts at Citi.”
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