Business Conditions Survey

October 2025

 NABE Panelists See Lower Recession Risk, Tighter Margins, and Modest Gains in Jobs and Investment

COMMENTS: “The October 2025 NABE Business Conditions Survey results indicate that while recession concerns have eased somewhat compared to earlier in the year, businesses continue to exercise caution in their operations,” said NABE President Gregory Daco, chief economist, EY-Parthenon, Ernst & Young, LLP. “While sales and capital spending have recorded gains, persistent cost pressures and uncertainty around demand are weighing on profit margins and expectations. Firms appear to be adapting through measured hiring and investment decisions, passing on only some cost increases to customers, and benefiting from a gradually improving labor market. However, policy uncertainty and concerns about slowing demand remain top of mind for businesses as they look ahead.”

“The survey results also show that the business landscape remains steady, but firms are not without their challenges,” added NABE Business Conditions Survey Chair Selma Hepp, chief economist and senior vice president, Cotality. “Many companies are still grappling with skills mismatches and shifts in labor market dynamics, such as changing salary expectations and the impact of remote work preferences, although the pool of labor applicants is growing. Nonetheless, the majority of respondents say their firms are not facing input shortages, and are passing along only a portion of cost increases to customers, suggesting that businesses are adapting to this evolving environment with measured responses rather than drastic changes.”

HIGHLIGHTS

• • For the first time in a year, more panelists report that employment rose rather than declined at their firms during Q3 2025. Twenty percent of respondents report that employment at their firms increased in the past three months—the largest share since the October 2024 survey. Eleven percent report a decline in employment, the lowest percentage since the July 2024 survey.
    
• Sales data present a mixed picture. Forty-eight percent of respondents report higher sales during the third quarter of 2025—the largest share since the April 2024 survey. However, the panel’s views regarding expectations for the next three months are evenly split, with 44% of respondents anticipating increased sales, and an equal share expecting sales to remain the same.
• Profit margins remain under pressure. Businesses continued to face a profit squeeze due to elevated costs during Q3 2025. For a third consecutive quarter, more panelists report weaker profits at their firms than do those noting gains. Just over half indicate that profit margins were unchanged. Expectations for profits over the next three months are similarly subdued.
• Shortages do not appear to be an issue for the majority of respondents. Seventy-two percent indicate that their firms are not facing labor shortages, and 74% report that they are not facing any other input shortages.
• Challenges in hiring compared to six months ago include skills mismatch (cited by 21% of respondents), salary expectations (11%), reduced immigration (9%), and remote work preference (9%). Several respondents note there is a larger pool of applicants from government or industry layoffs competing for fewer job openings. One panelist also said it is a “tough market for recent BA and MA graduates.”
• When asked to list the top three downside risks to their company’s outlook, the two most frequently mentioned are policy uncertainty (noted by 50% of respondents) and an overall demand slowdown (47%). Avoiding a recession is cited as among the three top upside risks by 57% of respondents.