The short version
- Manufacturing and service indices indicate sustained expansion for the ninth and twenty-seventh consecutive months, respectively.
- Payroll data from major processors shows job growth in September, though one provider reports a decline in employment at the smallest firms.
- Small business owners cite inflation and labor quality as primary concerns, with confidence levels varying significantly across different survey methodologies.
The American economy is displaying a complex picture of resilience and strain as the nation approaches the midterm elections. While broad indicators suggest that manufacturing and service sectors are expanding, small business owners—the backbone of the labor market—report mixed experiences. These enterprises employ roughly half of all workers and generate approximately fifty percent of the gross domestic product, making their sentiment a critical barometer for political and economic stability. Recent data reveals a divergence between macroeconomic growth figures and the micro-level challenges faced by individual proprietors.
Manufacturing activity remains robust, with the Institute for Supply Management’s Purchasing Manager’s Index marking its ninth straight month of expansion. This follows years of contraction, signaling a durable recovery in industrial output. New orders, production levels, and employment within this sector all stayed above the threshold indicating growth. Order backlogs also increased, suggesting that demand continues to outpace supply capacity. Similarly, the service sector has expanded for twenty-seven consecutive months, with new orders described as particularly strong by analysts tracking these metrics.
Broader economic growth figures have been revised upward, reinforcing the narrative of a strengthening economy. First-quarter annualized growth was adjusted to 2.5 percent from an earlier estimate of 2.1 percent. Second-quarter growth saw a more significant revision, rising to 2.2 percent from 1.5 percent. These adjustments suggest that the underlying economic performance is stronger than initial pessimistic headlines implied. However, this aggregate strength does not uniformly translate to every segment of the business community.
Hiring trends among small businesses present a contradictory picture depending on the data source. ADP, a major payroll processor, reported that private employers added 90,000 jobs in September, with hiring accelerating for the first time since May. Notably, establishments with one to nineteen workers contributed 18,000 of those positions. Gusto’s data aligns with this positive trend, estimating that small businesses added 28,000 jobs in September, marking the eighth consecutive month of gains. Healthcare and social assistance sectors led these additions, with growth appearing broad across regions and company sizes.
Conversely, Intuit’s QuickBooks Small Business Index offers a more cautious view. Based on data from millions of users, this index found that employment at businesses with one to nine employees actually fell by 7,000 jobs in September. This decline occurred across most sectors and regions, contrasting sharply with the gains reported by other providers. Paychex’s data suggests a middle ground, indicating that hiring in September matched the year-to-date average for companies with fewer than fifty employees, describing overall employment as stable rather than expanding or contracting significantly.
Despite these discrepancies in job numbers, revenue trends appear positive for many small firms. Intuit reported that inflation-adjusted average monthly revenue increased by 1.68 percent in September. This growth was widespread, occurring in eleven of twelve industries and nineteen of twenty states. Fiserv, a payment-processing company, also noted improving sales among US small businesses. However, they cautioned that consumer behavior remains selective. Traffic has been weaker even as customers spend more per transaction, indicating a shift in purchasing habits rather than a simple surge in volume.
Sentiment surveys highlight the persistent pressures facing business owners. The National Federation of Independent Businesses reported that its Small Business Optimism Index fell slightly below its long-term average, with uncertainty rising. Labor quality emerged as the top concern for 26 percent of owners, while inflation worried 20 percent. Expansion plans weakened, although 17 percent still intend to add jobs in the coming quarter. In contrast, the Justworks/US Chamber Small Business Index showed significant improvement in confidence during the third quarter. Seventy-two percent of respondents felt comfortable with their cash flow, yet only 27 percent believed the broader US economy was in good health.
Inflation remains a dominant theme across nearly all reports. It was cited as the biggest problem by 54 percent of owners in the Justworks/US Chamber survey. This concern persists despite the general expansion in manufacturing and services. Anecdotal evidence from Philadelphia, a heavily Democratic area in a swing state, supports the notion that clients are managing but struggling with higher costs and a tight labor market. A May survey by WSFS Bank found surprisingly strong confidence among Philadelphia-area businesses, suggesting regional variations may also play a role in how economic conditions are perceived.
As the election cycle intensifies, these mixed signals complicate the political narrative. While the macroeconomic data points to growth and stability, the micro-level experiences of small business owners reveal ongoing friction with inflation and labor markets. The divergence between different payroll data providers underscores the difficulty in capturing a single, unified picture of the small business sector. Policymakers and voters alike must weigh these competing indicators when assessing the health of the economy and its trajectory in the months ahead.
The coming weeks will likely bring further clarity as more quarterly data is released and election dynamics solidify. Whether the current expansion in manufacturing and services can sustain momentum while addressing small business concerns about costs and hiring remains an open question. The resilience shown by some sectors contrasts with the caution expressed by others, painting a portrait of an economy that is growing but not without significant internal tensions.
Sources behind this briefing
Go to the original reporting
- The Guardian US Politics↗Small business owners are doing OK – but will that help Trump overcome his low approval ratings?
